Westover Ridge Has a Management Contract with Its President That

question 60

Multiple Choice

Westover Ridge has a management contract with its president that requires a lump sum payment of $15 million to be paid upon the completion of the president's first 5 years of service.The company can earn 6.5 percent on its investments and wants to set aside an equal amount of money each year over the next 5 years to fund this obligation.How much money must the firm save each year?

• A)$2,895,734.60
• B)$2,698,346.17
• C)$2,401,033.67
• D)$2,634,518.06
• E)$2,848,018.22

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Definitions:

CCA Class

Capital Cost Allowance (CCA) Class refers to categories used in taxation to determine the depreciation rate that can be claimed for tax purposes on assets, depending on their nature and use in a business.

Break-Even Lease Payment

The payment amount at which the lessee neither profits nor loses money over the term of the lease.

Corporate Tax Rate

The percentage of a corporation's profits that is paid to the government as tax.

CCA Class

In Canadian taxation, a way to categorize depreciable properties for the purpose of Capital Cost Allowance calculations.