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ABC Products needs to replace its rawhide tanning and molding equipment. It can be used for...

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Finance

ABC Products needs to replace its rawhide tanning and moldingequipment. It can be used for five years and will have no salvagevalue. The equipment costs $930,000. The firm can lease it for$245,000 a year, or it can borrow the money to purchase theequipment at 8%. The firm's tax rate is 40%. The CCA rate is 20%(Class 8).What is the present value of the depreciation taxshield?

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ABC Products needs to replace its rawhide tanning and moldingequipment. It can be used for five years and will have no salvagevalue. The equipment costs $930,000. The firm can lease it for$245,000 a year, or it can borrow the money to purchase theequipment at 8%. The firm's tax rate is 40%. The CCA rate is 20%(Class 8).What is the present value of the depreciation taxshield?

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