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

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Definitions:

Markup

The amount added to the cost price of goods to cover overhead and profit, expressed as a percentage of the cost.

Gross Profit

The financial gain obtained after subtracting the cost of goods sold from the total revenue.

Net Profit

The amount of money remaining after all operating expenses, interest, taxes, and dividends have been deducted from total revenue.

Zone Price

The price based on geographic location or zone of customers.