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

question 11

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%.It is expected that the new machine will increase revenues by $9 million per year with production and support costs of $0.5 million per year.If the company sold it immediately after the end of year 3 for $8 million,what would be the net present value (NPV) of owning the asset,given a tax rate of 40%,and a cost of capital of 12%?

• A)$7,561,553
• B)$5,231,801
• C)$1,867,311
• D)$249,339
• E)-$152,244

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Definitions:

Life Expectancy

The average period that a person may expect to live, often influenced by factors like genetics, lifestyle, and environment.

Population

The total number of people inhabiting a particular area or country, including their demographics, distribution, and density.

Infant Mortality Rate

The statistical measure of the number of deaths of infants under one year of age per 1,000 live births.

Live-born Children

Infants who exhibit any sign of life, such as breathing, heartbeat, or voluntary muscle movement, after delivery, regardless of gestational age.