A New Machine Will Cost $720,000

question 87

Multiple Choice

A new machine will cost $720,000.It is in a CCA class pool that uses a declining balance rate of 20%.The company's tax rate is 42% and it requires a 12% rate of return on investments.Calculate the present value of the the tax shield the first year assuming the savings occur at year end.

• A)$60,480.00
• B)$54,000.00
• C)$27,000.00
• D)$30,240.00
• E)$37,285.71

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Definitions:

Investment Bank

A financial institution that provides advisory services, financing, and investment services to individuals, corporations, and governments.

Short-term Debt Securities

Financial instruments that represent borrowed funds which must be repaid within a short time frame, typically less than one year.

Money Markets

Financial markets for short-term borrowing and lending, dealing with assets that have high liquidity and short maturities.

Capital Market Instruments

Financial securities used in the capital markets to raise funds or investment, including stocks, bonds, debentures, and other vehicles.