DogChew Products Needs to Replace Its Rawhide Tanning and Molding

question 39

Multiple Choice

DogChew Products needs to replace its rawhide tanning and molding equipment. It can be used for five years and will have no salvage value. The equipment costs $930,000. The firm can lease it for
$245,000 a year, or it can borrow the money to purchase the equipment at 9%. The firm's tax rate is
39%) The CCA rate is 20% (Class 8) .
Assume that the original information is true, except that the firm uses the straight-line method to
Depreciate the equipment to zero over its five-year life. What is the annual depreciation tax shield?

• A) $26,876
• B) $53,752
• C) $62,023
• D) $84,074
• E) $72,540

---

Definitions:

Hydraulic Brake Rotor

A critical component in hydraulic braking systems, the rotor is a disc that brake pads press against to create friction and slow down the vehicle.

Servo-type Hydraulic Drum Brake

A braking system which combines hydraulic pressure and mechanical servo action to increase braking efficiency, often found in vehicles.

Non-servo Type Brake

A brake design that relies purely on mechanical force without the aid of hydraulic pressure or servo mechanisms, typically found in simpler braking systems.