Question: A company is considering a 6-year project that would require a $80,000 initial investment in net working capital and is expected to create cost savings

A company is considering a 6-year project that would require a $80,000 initial investment in net working capital and is expected to create cost savings of $130,000 before-tax annually. The project would require an asset with an installed cost of $900,000. The asset qualifies for a CCA rate of 20% and its salvage value is expected to be zero at the end of the 6 years. If the tax rate is 25% and the company requires a 14.5% return, what is the present value of the CCA tax shield?

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