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Your company is considering a project which will require the purchase of $765,000 in new...

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Finance

Your company is considering a project which will require the purchase of $765,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $276,000. Initial net working capital equal to 34.50% of sales will be required. All of the net working capital will be recovered at the end of the project. The firm requires a 11.25% return on similar investments. The tax rate is 35%, and the project life is 5 years. There are no other operating expenses. If the equipment is in a 38.00% CCA class, what is the present value of the CCA tax shield?

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