For Years 1 Through 6 Better Products Ltd

For Years 1 through 6 Better Products Ltd. had annual net income of $20,000, CCA of $40,000 each year, a 40 percent tax rate, a discount rate of 10 percent and annual cash sales of $200,000. The depreciable assets of Better Products belong in several different classes under the Income tax Act, have a salvage value of zero at the end of six years, and were all bought new at the beginning of Year 1. The present value factors, in simplified form, for 10 percent are:

-If the appropriate tax rate is 35%, the after-tax effect of a single CCA deduction of $60,000 is

A) $39,000 net after-tax cash outflow.
B) $39,000 net after-tax cash inflow.
C) $21,000 net after-tax cash outflow.
D) $21,000 net after-tax cash inflow.
E) $24,000 net after-tax cash inflow.

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Access For Free