A New Machine Will Cost $720,000

question 8

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 cash savings from 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:

Supply Curve

A graph showing the relationship between the price of a good and the amount that suppliers are willing and able to sell at different prices.

Corn Crop Yield

The total production of corn measured in units (such as bushels per acre) harvested from a given area.

Complements

Products or services that complement each other, such that a rise in the demand for one results in a rise in the demand for its counterpart.

Price of Yogurt

The amount of money required to purchase a unit or quantity of yogurt in the market.