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2. Spherical Manufacturing recently spent $21 million to purchase some equipment used in the manufacture of disk brakes. This equipment has a CCA rate of 30% and Spherical's marginal corporate tax rate is 39%. a. What are the annual CCA deductions associated with this equipment for the first five years? b. What are the annual CCA tax shields for the first five years? c. What is the present value of all the CCA tax shields assuming the equipment is never sold and the appropriate discount rate is 12% per year? d. The company sells the machine at year 5. It is assumed that such disposal is happened at the beginning of the tax year 6. The sale price of this machine is $26 million. Calculate the overall present value of expected CCA tax shields. (Discount rate is assumed to be 12%) e. It is the continuation of part (d). If the capital tax is applied, calculate the present value of the capital gain tax. (Discount rate is assumed to be 12%) 2. Spherical Manufacturing recently spent $21 million to purchase some equipment used in the manufacture of disk brakes. This equipment has a CCA rate of 30% and Spherical's marginal corporate tax rate is 39%. a. What are the annual CCA deductions associated with this equipment for the first five years? b. What are the annual CCA tax shields for the first five years? c. What is the present value of all the CCA tax shields assuming the equipment is never sold and the appropriate discount rate is 12% per year? d. The company sells the machine at year 5. It is assumed that such disposal is happened at the beginning of the tax year 6. The sale price of this machine is $26 million. Calculate the overall present value of expected CCA tax shields. (Discount rate is assumed to be 12%) e. It is the continuation of part (d). If the capital tax is applied, calculate the present value of the capital gain tax. (Discount rate is assumed to be 12%)

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