What are the annual CCA deductions associated with this equipment for the fest five years? b. What are the annual CCA tax shields for the first five years? EWhat is the present value of the firat five CCA tax shields ifhe appropriate dacount rate is 12% per year?
What are the annual CCA deductions associated with this equipment for the fest five years? b. What are the annual CCA tax shields for the first five years? EWhat is the present value of the firat five CCA tax shields ifhe appropriate dacount rate is 12% per year?
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:Spherncal Manufacturing reoenty spent $14 milion to purchase some equipment used in the manufacture of dsk drives. This equipment has a CCA rate of 20% and Bphericals marginal corporate tax rate in
35%
a. What are he annual CCA deductions associated with this equipment for the fiest five years?
b. What are the annual CCA tax shields for the first five years?
e. What is the present value of the first five CCA tax shields if the appropriate discount rate is 12% per year?
d. What is the prosent value of alt the CCA tax shieids assuming the equiment is never sold and the appropriate discount rate is 12% per yea?
e. How might your answer to part (d) change if Spherical anticipates that ts marginal corporate tax rate will increase substantialy over the next five years?
a. What are the annual CCA deductions associated with this equipment for the first five years?
The CCA deduction for year 1 is S (Round to the nearest dolar.)
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