b) You purchase equipment for $50,000 and it costs $5,000 to have it delivered and installed. Based on past information, you believe that you can sell the equipment for $8,500 when you are done with it in 3 years. The company's marginal tax rate is 20%. If the applicable CCA rate is 10% and the required return on this project is 5%, what is the present value of the CCA tax shield by using the formula (10 Marks) IdTe 1+0. 5r SndTe PV tax shield on CCA = d+r 1+r d+r (1+r)"
b) You purchase equipment for $50,000 and it costs $5,000 to have it delivered and installed. Based on past information, you believe that you can sell the equipment for $8,500 when you are done with it in 3 years. The company's marginal tax rate is 20%. If the applicable CCA rate is 10% and the required return on this project is 5%, what is the present value of the CCA tax shield by using the formula (10 Marks) IdTe 1+0. 5r SndTe PV tax shield on CCA = d+r 1+r d+r (1+r)"
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 17P: The Perez Company has the opportunity to invest in one of two mutually exclusive machines that will...
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Question
![b) You purchase equipment for $50,000 and it costs $5,000 to have it delivered and
installed. Based on past information, you believe that you can sell the equipment
for $8,500 when you are done with it in 3 years. The company's marginal tax rate
is 20%. If the applicable CCA rate is 10% and the required return on this project is
5%, what is the present value of the CCA tax shield by using the formula (10
Marks)
IdTc
1+0.5r
1
PV tax shield on CCA
Hea
d+r
1+r
d+r
(1 + r)"
redictions: On
Ps
video
DELL](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fae3f4f00-ad4f-41f8-9ef9-b8d4bde0bbfd%2F574b3b19-5a05-4a0d-adb8-3d4fdc2bd5aa%2F01jics_processed.jpeg&w=3840&q=75)
Transcribed Image Text:b) You purchase equipment for $50,000 and it costs $5,000 to have it delivered and
installed. Based on past information, you believe that you can sell the equipment
for $8,500 when you are done with it in 3 years. The company's marginal tax rate
is 20%. If the applicable CCA rate is 10% and the required return on this project is
5%, what is the present value of the CCA tax shield by using the formula (10
Marks)
IdTc
1+0.5r
1
PV tax shield on CCA
Hea
d+r
1+r
d+r
(1 + r)"
redictions: On
Ps
video
DELL
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