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Your company is considering purchasing a new piece of machinery. The machine will cost $900,000. It will operate for 3 years. At the end of the project the expected salvage value is $350,000. The CCA rate is 30%. The discount rate (the required rate of return) is 12%. The tax rate is 34%. The machine will generate revenues of $1, 100,000 per year. The costs of operating the machine will be $420,000 per year. The asset class remains
Problem 1: What is the present value of the salvage value?
Option 1: $146,804.68
Option 2: $222,431.33
Option 3: $164,421.24
Option 4: $249,123.09
Option 5: None of the above
Problem 2: What is the present value of the CCA Tax Shield?
Option a) $139,552.49
Option b) $133,633.89
Option c) $152,843.21
Option d) $146,360.92
Option e) None of the above
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