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What is the present value of cca tax shield from purchasing

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Problem 1: Kanye West Inc. is currently assessing whether it should purchase a new robotic production line. The new robotic line will cost $2,750,000 and last 10 years. The equipment qualifies for a CCA rate of 30%. It also qualifies for the Accelerated Investment Incentive with 1.5 times CCA allowed in the year of acquisition. The company's current cost of capital for this project is 10% and its income tax rate is 28%. What is the present value of the CCA tax shield from purchasing the new robotic production line?

a) $577,500
b) $603,750
c) $635,526
d) $644,135

Reference no: EM132889174

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