Calculate the total present value of the tax shield, Financial Management

Assignment Help:

Nortel is considering the purchase of a new  call routing system.  The system will cost $50M to purchase, an additional $7M to install, and will last for 30 years.  The CCA rate associated with the system is 6%, the firm's margin tax rate is 20%, and the firm's WACC is 9%. a.  Using Excel, create a CCA table, as in class for the 30 year life of the asset.  Assume that the asset is sold for its UCC at the end of year 30.

b.  Add a column that shows the value of the annual tax shield.

c.  Add a column that shows the PV of the annual tax shield.

d.  Calculate the total PV of the tax shield in Excel.

e.  Calculate the PV of the tax shield using the PVCCA formula.


Related Discussions:- Calculate the total present value of the tax shield

Hy would a borrower be willing to pay and a lender demand, Would there be p...

Would there be positive interest rates on bonds in a world with absolutely no risk no default risk, maturity risk, and so on? Why would a, borrower be willing to pay and a lender d

Validity of the accounting implications, Question: In each case below a...

Question: In each case below and having regard to your knowledge of Accounting Concepts, comment on and assess the validity of the accounting implications/practices to be adop

Capital structure definition, CAPITAL STRUCTURE DEFINITION According to...

CAPITAL STRUCTURE DEFINITION According to Gerstenberg, Capital structure refers to 'the makeup of a firm's capitalisation'.  In other way, it signifies the mix of different sou

Fund managers or the asset management company, Fund Managers or the Asset M...

Fund Managers or the Asset Management Company (amc) The role of fund managers is highly significant in the mutual fund operations. So far, this role is being played by the Mutu

Explain the concept of competitive advantage, There are dissimilar views on...

There are dissimilar views on how an organisation can gain competitive advantage, but contemporary research is placing greater emphasis on the resource-based view. Expl

Evaluate net present value of machine, Kenneth Su Gold Corp (KSGC) is consi...

Kenneth Su Gold Corp (KSGC) is considering the purchase of a new piece of machinery. The new machinery would cost $80,000. You are given the following facts: The new machine

Noi approach, Two companies are identical in all aspects except in the debt...

Two companies are identical in all aspects except in the debt-equity profile. Company X has 14% debentures worth Rs. 25,00,000 whereas company Y does not have any debt. Both compan

Conversion parity price, We defined the conversion premium as the dif...

We defined the conversion premium as the difference between the market price of the convertible and the conversion value. The conversion premium ratio tells us ab

Explain the political risk related with making fdi, What factors would you ...

What factors would you consider in evaluating the political risk related with making FDI in a foreign country? Answer: Factors to be considered as follow: a) The host countr

The time value of money , Calculate the present value and determine the npv...

Calculate the present value and determine the npv, Financial Management. Assume today is 3 December 2009. Helen is 30 years old and has a Bachelor of Business. She is currently em

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd