Manti Company Purchased a New Machine on January 2, Year

Manti Company purchased a new machine on January 2, Year 1. Cost and other data relating to the machine follow:
$\begin{array}{|l|r|}\hline \text { Cost of Machine } & \$ 140,000 \\\hline \text { Salvage Value } & \$ 20,000 \\\hline \text { Useful Life } & 12 \text { years } \\\hline\end{array}$
The machine is in Class 7 with a maximum $15 \%$ CCA rate. Manti uses an after-tax discount rate of $12 \%$ for capital budgeting decisions. The income tax rate is $40 \%$ .
- If Manti deducts the maximum CCA for tax purposes,what will be the approximate present value (as of January 2,Year 1) of the CCA tax shield for Year 1?(Do not round your intermediate calculations.)

A) $3,750.
B) $4,200.
C) $6,429.
D) $7,500.

Correct Answer:

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