Your fiRm Needs a Computerized Line-Boring Machine Which Costs $80,000

question 168

Multiple Choice

Your firm needs a computerized line-boring machine which costs $80,000, and requires $20,000 in maintenance for each year of its three year life. After three years, the salvage value will be zero.
The machine falls into the Class 10 equipment category (CCA rate 30%) . Assume a tax rate of 34%
And a discount rate of 10%.
Assume the machine can be sold for $10,000 at the end of year 1. Compute the present value of the
Pre-tax salvage value at the end of year 3.

• A) $10,000
• B) $7,513
• C) $6,600
• D) $8,616
• E) $9,678

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Definitions:

Transactional Relationship

A business relationship focused primarily on the exchange of goods or services for payment, with little personal connection.

Distinct Component

a unique and identifiable part of a larger system or product, which serves a specific function and is often necessary for the overall operation or effectiveness.

Sales Call

A communication, either via telephone or face-to-face, initiated by a salesperson towards a potential or existing customer with the objective of making a sale.

Logical Sequence

An arrangement of ideas or actions in a coherent order that follows clear and rational progression.