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Determine the present value of the cca tax shield

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Reference no: EM133036464

Question - New equipment costs $845,000 and is expected to last for five years with no salvage value. During this time the company will use a 30% CCA rate. The new equipment will save $120,000 annually before taxes. If the company's required rate of return is 11%, determine the present value of the CCA tax shield (PV CCATS) of the purchase. Assume a marginal tax rate of 35%.

a. $199,710

b. $179,710

c. $205,680

d. $159,710

e. $189,710

Reference no: EM133036464

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