Suppose a Project Requires a Capital Investment of $300,000

question 13

Multiple Choice

Suppose a project requires a capital investment of $300,000.The project will last for six years,at which time the asset will be sold for $90,000.The asset will be depreciated on a declining balance basis at a CCA rate of 20 percent.The firm's marginal tax rate is 40 percent.The firm's required rate of return is 8 percent.Assume the asset class remains open after the asset is sold.What is the present value of the CCA tax savings for the project?

• A) $63,472.64
• B) $65,950.56
• C) $66,335.32
• D) $66,720.08

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Definitions:

POM

Principles of Management; these are fundamental guidelines for the management of an organization concerning its mission, vision, and objectives.

TPS

Acronym for Transaction Processing Systems, which are software and hardware systems designed for processing business transactions efficiently and accurately.

Audits

Inspections or examinations of accounts, records, or processes to assess compliance with established standards or regulations.

Interorganizational

Describes interactions or relationships that occur between two or more organizations, often involving coordination and cooperation in achieving mutual goals.