Use the Information Below to Answer the Following Question(s)

question 121

Multiple Choice

Use the information below to answer the following question(s) .Albernie Ltd.purchased a CCA Class 8 (CCA rate of 20%) item of equipment for $90,000.The equipment was the only item in the Class 8 capital cost allowance pool.The equipment is expected to generate savings in the amount of $40,000 per year.The company uses straight-line depreciation, estimates a 3 year useful life with $20,000 salvage value for the new equipment.The tax rate is 35%, and Albernie has a required rate of return of 9.0%.
-What is present value of the tax shield that Albernie Ltd.can expect from the equipment?

• A)$ 18,124
• B)$ 17,099
• C)$ 12,816
• D)$ 7,667
• E)$ 10,222

---

Definitions:

Sampling Error

Sampling error is the discrepancy between a sample statistic and its corresponding population parameter, caused by selecting a sample rather than conducting a census.

Mean Income

The average amount of income received over a specific period of time, calculated by dividing the total income by the number of recipients.

Binomial Variable

Variable consisting of exactly two categories.

Probabilities

The measure of the likelihood that an event will occur, often expressed as a number between 0 and 1.