Layton Company Is Replacing an Old Delivery Van with a New

question 39

Multiple Choice

Layton Company is replacing an old delivery van with a new van. The following data relate to this investment decision:

The old van is in Class 10 with a maximum CCA rate of 30% and will last for six more years. The new van is also in Class 10 with a maximum CCA rate of 30%. The income tax rate is 40%, and the company's after-tax cost of capital is 10%.
-What is the value of the incremental UCC (the "C" in the PV CCA formula) used in the calculation for the present value of CCA tax savings?

• A) $20,000
• B) $19,000
• C) $18,000

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Definitions:

Straight Commission Plan

A compensation structure where an employee's earnings are derived entirely from commissions made from the sales they generate.

Percentage Commission

A method of compensation where an employee or agent is paid a percentage of the sales they generate or the deals they close.

Intrinsic Rewards

The personal satisfaction and enjoyment derived from completing a task or achieving a goal, independent of external rewards or recognition.

Extrinsic Rewards

Rewards given to employees that are external to the job itself, such as pay, benefits, bonuses, and promotions, aimed at motivating employees' performance.