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Home Q & A Board Other Fields Homework Help Business Economics
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ashly138 ashly138
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Posts: 686
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6 years ago
A new machine will cost $500,000. It is in a CCA class pool that uses a declining balance rate of 30%. The company's tax rate is 40% and it requires a 15% 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) $126,998.42
B) $78,214.34
C) $52,173.91
D) $119,765.22
E) $26,086.96
Textbook 
Cost Accounting: A Managerial Emphasis, Canadian Edition

Cost Accounting: A Managerial Emphasis, Canadian Edition


Edition: 7th
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#1
6 years ago
E
Explanation:  E) Yr. 1 CCA $500,000 × 1/2 × 0.30 = $75,000; $75,000 × 0.40 = $30,000; PV = $26,086.96
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