Alpha Corporation has just invested $1,200,000 in new equipment which has a useful life of...
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Alpha Corporation has just invested $1,200,000 in new equipment which has a useful life of 6 years and a salvage value of $200,000. The Corporation has a tax rate of 40% and the equipment falls into a 30% CCA class and the half-year rule applies. The new equipment would result in annual pre-tax savings of $350,000 in each of the 6 years starting in Year 1. The equipment requires an investment in working capital of $60,000 at t=0 which is fully recovered in Year 6. The companys cost of capital is 12%. What is the present value of the CCA tax shields over the projects life?
Select one:
a. $147,770
b. $258,597
c. $184,712
d. $295,539
e. $221,767
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