Use the Information for the Question(s)below

question 69

Multiple Choice

Use the information for the question(s) below.
Epiphany Industries is considering a new capital budgeting project that will last for three years. Epiphany plans on using a cost of capital of 12% to evaluate this project. Based on extensive research, it has prepared the following incremental cash flow projects:

-Luther Industries has outstanding tax loss carryforwards of $70 million from losses over the past four years. If Luther earns $15 million per year in pre-tax income from now on, in how many years will Luther first pay taxes?

• A)4 years
• B)7 years
• C)5 years
• D)2 years

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Definitions:

CCA Class

Refers to the categories under the Canadian tax system specifying the depreciation rate that can be claimed on assets for tax purposes.