Layton Company Is Replacing an Old Delivery Van with a New

question 112

Multiple Choice

Layton Company is replacing an old delivery van with a new van. The following data relate to this investment decision:
$\begin{array}{|l|r|}\hline \text { Cost of the new van now } & \$ 20,000 \\\hline \text { Annual cash operating costs of the new Van } & \$ 6,000 \\\hline \text { Useful life of the new van } & 6 \text { years } \\\hline \text { Salvage value of the van at the End of six years } & \$ 2,000 \\\hline \text { Original cost of the old van two years ago } & \$ 18,000 \\\hline \text { Book value of the old van now } & \$ 4,000 \\\hline \text { Salvage value of the old van now } & \$ 1,000 \\\hline \text { Salvage value of the old van six year from now } & \$ 200 \\\hline \text { Annual Cash operating Costs of the old van } & \$ 8,000 \\\hline\end{array}$
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
• D) $16,000

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Definitions:

Learning And Development

The process of enhancing the skills, competencies, and knowledge of an individual or a group, aimed at improving personal and organizational effectiveness.

Business Impact Data

Information and metrics that demonstrate the effect of learning and development activities on business outcomes, often used to justify investments in training.

CEOs

Chief Executive Officers, who are the highest-ranking individuals in a company or organization, responsible for making major corporate decisions.

Utility Calculation

A method for assessing the value or efficacy of a service or product by measuring its usefulness and impact.