If a Leased Asset Were Scrapped from a Continuing CCA

question 65

Multiple Choice

If a leased asset were scrapped from a continuing CCA pool after four years, and its UCC were $10,000 and its salvage is zero, what would the present value of this asset's tax shelter be if the appropriate after-tax borrowing rate is 9%, the CCA rate is 20%, and the tax rate is 40%?

• A)- $2,759
• B)- $1,955
• C)+ $10,000
• D)+ $2,759

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Definitions:

Supply And Demand

A fundamental economic concept that describes the relationship between the availability of goods and services and the desire for them by consumers, impacting their prices.

Cumulative Abnormal Returns

The sum of abnormal returns over a specified time period, often used to assess the impact of events in event studies.

Event Studies

Analysis methodology used to assess the impact of a specific event on the value of a company or an asset.

Firm-specific Events

Events that affect only a particular company's stock or financial performance, rather than the market or industry as a whole.