Find what is the present value of the salvage value

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Reference no: EM132622313

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

Reference no: EM132622313

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