How Much Must Be Deposited on January 1, 2018 in a Savings

question 31

Multiple Choice

How much must be deposited on January 1, 2018 in a savings account paying 6% annually in order to make annual withdrawals of €25,000 at the end of the years 2018 and 2019? The present value of one at 6% for one period is .9434.

• A) €45,835
• B) €47,175
• C) €50,000
• D) €22,250

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Definitions:

Depreciation Tax Shield

The reduction in income tax expense realized by depreciating fixed assets for tax purposes.

CCA Class

Classified as Capital Cost Allowance, it refers to the categorization in tax systems for claiming depreciation expense for tax purposes.

Borrowed Funds

Money that has been obtained through loans or credit from financial institutions or individuals, which typically needs to be repaid with interest.

Incremental Annual Cash Flow

The additional cash flow an organization receives from taking on a new project or investment, calculated on an annual basis.