A Machine Is Purchased for $500,000 and Is Used Through

question 17

Multiple Choice

A machine is purchased for $500,000 and is used through the end of Year 2.The machine falls under asset class 43 with a capital cost allowance (CCA) rate of 30%.At the end of Year 2,the machine is sold for $75,000.What is the present value of the overall CCA tax shields if the firm's marginal tax rate is 40% and its cost of capital is 5%?

• A)$232,128
• B)$201,334
• C)$175,997
• D)$167,347
• E)$144,023

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Definitions:

Deseret

A provisional state proposed by Mormon settlers in what is now Utah in the mid-19th century, reflecting their aspiration for a degree of autonomy and governance according to their beliefs.

Family Farms

Agricultural operations that are owned and run by families, rather than corporations, often passed down through generations, and play a key role in the production of food on a local or small scale.

Gold Mining

The act or process of extracting gold from the earth, which can involve various methods including panning, sluicing, dredging, hard rock mining, and by-product mining.

Cayuse Indians

A Native American tribe originating from what is now the Pacific Northwest of the United States, known for their significant interaction with early settlers and involvement in the Cayuse War.