Earthworks is an excavation company which started its operations in the year 2015. The board of governors set the Minimum acceptable rate of return for the company at 16% after-tax. Due to the nature of their work, Earthworks own equipment which are in CCA class 8 (CCA rate = 20%). For the 5 years following its inception, Earthworks purchased 4 Machines, two of which they ended up selling. The record of their transactions is as summarized below: Transaction Purchase of Machine A Dollar Value of transaction Tax Year 2015 $99,000 2017 Purchase of Machine B $189,000 2017 Sale of Machine A $78,300 2018 Purchase of Machine C $128,000 2018 Sale of Machine B $159,200 2019 Purchase of Machine D $163,000 2019 Sale of Machine C $99,100 What is the remaining Undepreciated Capital cost at the end of year 2018? b) What is the equivalent annual worth of the tax savings associated with these transactions if the corporate tax rate is 24%?
Earthworks is an excavation company which started its operations in the year 2015. The board of governors set the Minimum acceptable rate of return for the company at 16% after-tax. Due to the nature of their work, Earthworks own equipment which are in CCA class 8 (CCA rate = 20%). For the 5 years following its inception, Earthworks purchased 4 Machines, two of which they ended up selling. The record of their transactions is as summarized below: Transaction Purchase of Machine A Dollar Value of transaction Tax Year 2015 $99,000 2017 Purchase of Machine B $189,000 2017 Sale of Machine A $78,300 2018 Purchase of Machine C $128,000 2018 Sale of Machine B $159,200 2019 Purchase of Machine D $163,000 2019 Sale of Machine C $99,100 What is the remaining Undepreciated Capital cost at the end of year 2018? b) What is the equivalent annual worth of the tax savings associated with these transactions if the corporate tax rate is 24%?
Chapter1: Making Economics Decisions
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Transcribed Image Text:Earthworks is an excavation company which started its operations in the year 2015. The
board of governors set the Minimum acceptable rate of return for the company at 16% after-tax. Due
to the nature of their work, Earthworks own equipment which are in CCA class 8 (CCA rate = 20%).
For the 5 years following its inception, Earthworks purchased 4 Machines, two of which they ended
up selling. The record of their transactions is as summarized below:
Transaction
Purchase of Machine A
Dollar Value of transaction
Tax Year
2015
$99,000
2017
Purchase of Machine B
$189,000
2017
Sale of Machine A
$78,300
2018
Purchase of Machine C
$128,000
2018
Sale of Machine B
$159,200
2019
Purchase of Machine D
$163,000
2019
Sale of Machine C
$99,100
What is the remaining Undepreciated Capital cost at the end of year 2018?
b) What is the equivalent annual worth of the tax savings associated with these transactions if the
corporate tax rate is 24%?
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