Scotia Manufacturing Limited Is a Nova Scotia Based Manufacturing Company

question 136

Multiple Choice

Scotia Manufacturing Limited is a Nova Scotia based manufacturing company consideringacquiring new machinery worth $66 275. Scotia Manufacturing may purchase the equipment fromtheir supplier or lease it from Atlantic Leasing. The machinery's estimated salvage value after 6 years is estimated at $7 000. Scotia Manufacturing's tax rate is 40%, before-tax borrowing rate 12%, and the CCA rate is 20%. Keeping in mind that Scotia Manufacturing is eligible for the federal Investment Tax Credit (ITC) , what is the present value of the company's cost of purchasing the equipment? Round your final answer to the nearest dollar.

• A) $35 739
• B) $37 515
• C) $39 734
• D) $32 866

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Definitions:

Product Consumed

Refers to goods or services that have been used by consumers, fulfilling needs or wants.

Marginal Utility

The extra pleasure or benefit a customer gets from purchasing an additional unit of a product or service.

Utility

The satisfaction or benefit derived by consuming a product or service.

Objectively Determined

Describes a value or decision made based on factual and unbiased criteria, removing personal feelings or opinions.