Moore & Moore (MM) Is Considering the Purchase of a New

question 34

Multiple Choice

Moore & Moore (MM) is considering the purchase of a new machine for $50,000,installed.MM will use the CCA method to depreciate the machine.This machine is included in CCA class 8 (20%) .MM expects to sell the machine at the end of its 4-year operating life for $10,000.If MM's marginal tax rate is 40%,what will be the present value of the CCA tax shield when it disposes of the machine at the end of Year 4? Assume that the relevant discount rate is 10%.

• A)$10,905
• B)$9,059
• C)$9,400
• D)$8,930

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Definitions:

Equilibrium Quantity

Supply and demand volume of goods or services at the price where equilibrium is achieved.

Market Price

The current price at which a good or service can be bought or sold in a marketplace, determined by supply and demand forces.

Equilibrium Price

The price at which the quantity of a good or service demanded equals the quantity supplied, leading to market equilibrium.

Quantity Supplied

The total amount of a particular good or service that producers are willing to provide at a given price.