A Machine Is Purchased for $500,000 and Is Used Through

question 17

Multiple Choice

A machine is purchased for $500,000 and is used through the end of Year 2.The machine falls under asset class 43 with a capital cost allowance (CCA) rate of 30%.At the end of Year 2,the machine is sold for $75,000.What is the present value of the overall CCA tax shields if the firm's marginal tax rate is 40% and its cost of capital is 5%?

• A)$232,128
• B)$201,334
• C)$175,997
• D)$167,347
• E)$144,023

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Definitions:

Deposit

A sum of money placed into a bank account or given as initial payment or security for the purchase of an item.

Compounded Daily

The process of calculating interest on both the initial principal and the accumulated interest from previous periods on a daily basis.

Interest

The cost of borrowing money or the return on investment for lending money, determined as a percentage of the principal amount.

Desired Amount

The specific sum of money or financial goal an individual or entity aims to achieve.