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Suppose a project requires a capital investment of $300,000. The project will last for six years, at ...

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Suppose a project requires a capital investment of $300,000. The project will last for six years, at ...

Suppose a project requires a capital investment of $300,000. The project will last for six years, at which time the asset will be sold for $90,000. The asset will be depreciated on a declining balance basis at a CCA rate of 20%. The firm's marginal tax rate is 40%. The firm's required rate of return is 8%. Assume the asset class remains open after the asset is sold. What is the present value of the CCA tax savings for the project assuming accelerated investment incentive is applicable for CCA in year 1?

▸ $63,472.64

▸ $65,950.56

▸ $72,684.53

▸ $66,335.32

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Corporate Finance

Edition: 5^th

Author: Booth

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