A Textile Company Invests $12 Million in an Open-End Spinning

question 70

Multiple Choice

A textile company invests $12 million in an open-end spinning machine.The machine belongs to asset class 43 and has a capital cost allowance (CCA) rate of 30%.If the company sold it immediately after the end of year 3 for $8 million,what would be the present value of the lost CCA tax shields from the sale of this asset,given a tax rate of 40%,and a cost of capital of 12%?

• A)$654,336
• B)$928,910
• C)$1,452,613
• D)$1,626,926
• E)$2,285,714

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