3. Solar Solutions has purchased new manufacturing equipment that cost $400,000. Calculate the yearly tax savings from the CCA tax shield for the next three years. Assume that the income tax rate is 30%, the CCA rate is 30%, and the weighted-average cost of capital (WACC) is 12%. Assume that CCA in the first year is subject to the accelerated depreciation method for the year of acquisition. (Hint. Use Microsoft Excel to calculate the discount factor(s).) (Do not round your intermediate calculations. Round your final answers to 2 decimal places.) X Answer is complete but not entirely correct. Year 1 2 3 $ $ $ PV of Tax Savings 91,071.43 X 56,919.64 X 35,574.78 x
3. Solar Solutions has purchased new manufacturing equipment that cost $400,000. Calculate the yearly tax savings from the CCA tax shield for the next three years. Assume that the income tax rate is 30%, the CCA rate is 30%, and the weighted-average cost of capital (WACC) is 12%. Assume that CCA in the first year is subject to the accelerated depreciation method for the year of acquisition. (Hint. Use Microsoft Excel to calculate the discount factor(s).) (Do not round your intermediate calculations. Round your final answers to 2 decimal places.) X Answer is complete but not entirely correct. Year 1 2 3 $ $ $ PV of Tax Savings 91,071.43 X 56,919.64 X 35,574.78 x
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:3. Solar Solutions has purchased new manufacturing equipment that cost $400,000. Calculate the yearly tax
savings from the CCA tax shield for the next three years. Assume that the income tax rate is 30%, the CCA rate
is 30%, and the weighted-average cost of capital (WACC) is 12%. Assume that CCA in the first year is subject to
the accelerated depreciation method for the year of acquisition. (Hint. Use Microsoft Excel to calculate the
discount factor(s).) (Do not round your intermediate calculations. Round your final answers to 2 decimal
places.)
X Answer is complete but not entirely correct.
Year
1
2
3
$
$
$
PV of
Tax Savings
91,071.43 x
56,919.64 X
35,574.78 X
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