Company A believes it can sell 19,524 home security devices per year at $28 apiece....
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Company A believes it can sell 19,524 home security devices per year at $28 apiece. They cost $19 each to manufacture (variable cost). Fixed production costs will run $50,000 per year. The necessary equipment costs $159,185 to buy and will be depreciated at a 30 percent CCA rate. The equipment will have zero salvage value after the five-year life of the project. When this project is over, there will still be other assets in the CCA class. Company A will need to invest $42,500 in net working capital up front, but no additional net working capital investment will be necessary. The discount rate is 13 percent, and the tax rate is 39 percent. Compute the present value of the tax shield on CCA. Round to 2 decimals.
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