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:

Standard Deviations

A statistical measure that quantifies the amount of variation or dispersion of a set of data values from the mean.

Normal Distribution

A bell-shaped frequency distribution curve where most occurrences take place in the middle of the range and taper off symmetrically towards extremes.

Marlowe-Crowne Scale

A psychological questionnaire measuring social desirability bias, indicating how much people's responses are influenced by wanting to be perceived favorably.

Internal Reliability

A measure of the consistency of responses across items within a test or survey.