A New Machine Will Cost $720,000

A new machine will cost $720,000. It is in a CCA class pool that uses a declining balance rate of 20%. The company's tax rate is 42% and it requires a 12% rate of return on investments. Calculate the cash savings from the tax shield the first year assuming the savings occur at year end.

A) $60,480.00
B) $54,000.00
C) $27,000.00
D) $30,240.00
E) $37,285.71

Correct Answer:

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