Suppose a Project Requires a Capital Investment of $300,000

question 110

Multiple Choice

Suppose a project requires a capital investment of $300,000.The project will last for six years, at which time the asset will be sold for $90,000.The asset is a Class 8 asset, with a CCA rate of 20%.The firm's marginal tax rate is 40%.The firm's required rate of return is 8%.Assume the asset class remains open after the asset is sold.What is the present value of the CCA tax savings for the project assuming half-year rule is applicable for CCA in year 1?

• A)$63,472.64
• B)$65,950.56
• C)$66,335.32
• D)$66,720.08

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