A Textile Company Invests $12 Million in an Open-End Spinning

question 91

Multiple Choice

A textile company invests $12 million in an open-end spinning machine.The machine belongs to asset class 43 and has a capital cost allowance (CCA) rate of 30%.If the company sold it immediately after the end of year 3 for $8 million,what would be the overall present value of the CCA tax shields from this asset,given a tax rate of 40%,and a cost of capital of 12%?

• A)$912,310
• B)$1,076,346
• C)$1,617,972
• D)$2,432,211
• E)$3,244,898

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Definitions:

Discreteness

Pertains to the characteristic of being separate and distinct in nature, often referring to the classification of data or phenomena into distinct categories.

External Attribution

The process of inferring that a person's behavior is due to situational factors, rather than their own personal characteristics.

Situational Attribution

Attributing a behavior to external factors or the situation in which the behavior occurred.

Personalism

Behaviour that appears to be directly intended to benefit or harm oneself rather than others.