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Present value of the cca tax shield

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A company is evaluating two different steel bending machines using its WACC of 7.5%. Machine A costs $320,000, has a three-year life, and has pre-tax operating costs of $83,000 per year. Machine B costs $495,000, has a five-year life, and has pre-tax operating costs of $42,000 per year. The PVCCATS (Present Value of the CCA Tax Shield) of machine A is equal to 78,613 whereas the PVCCATS for machine B is equal to 121,605. The company tax rate is 35%. Which machine should be chosen?

Reference no: EM132501098

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