The Sisyphean Company Is Considering a New Project That Will

question 38

Multiple Choice

The Sisyphean Company is considering a new project that will have a CCA deduction of $2.5 million in the first year.If Sisyphean's marginal corporate tax rate is 40% and its average corporate tax rate is 30%,then what is the value of the CCA tax shield on the company's new project in year 1?

• A)$750,000
• B)$1,000,000
• C)$1,500,000
• D)$1,750,000
• E)$2,500,000

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Definitions:

MVA

Market Value Added, a calculation that shows the difference between the market value of a company and the capital contributed by investors.

Straight-line Basis

A method of calculating depreciation and amortization by allocating an equal amount of expense over each period of the asset's useful life.

Taxable Income

Taxable income is the portion of an individual's or a company's income used to determine how much tax they owe to the government in a given tax year.

Net Fixed Assets

The value of a company's property, plant, and equipment minus depreciation, representing long-term investments in physical assets.