A3Q6 A new printing machine costs $19,000 and has an installation cost of...
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Accounting
A3Q6
A new printing machine costs $19,000 and has an installation cost of $1,000. It belongs to CCA Class 8, which means that it has a CCA rate of 20%. The manufacturer of this machine guarantees that this machine will last for five years. Assume a tax rate of 40%. a. In the table provided, fill in the beginning undepreciated cost of capital (Beg UCC), the capital cost allowance (CCA), the ending undepreciated cost of capital (End UCC), and the CCA tax shield (CCATS) for each of the next five years. Remember to use the half-year rule. Year Beg UCC CCA End UCC CCATS 2 3 4 5 b. Assuming a required return of 12%, calculate the present value of CCATS (PVCCATS) for each of the five years, using the numbers calculated in part (a). c. Based on the numbers calculated in part (b) above, what is the total PVCCATS over the five years? d. Assume that salvage value at the end of Year 5 is $1,000. What is the total PVCCATS if we use the long formula? (d+k)l 1-k (d+k) L(1+k)N e. What is the reason for the difference between your answers in parts (c) and (d)
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