Tamim Products is planning to invest in an equipment to implement a cost-cutting proposal. The pre-tax...

 

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Tamim Products is planning to invest in an equipment to implement a cost-cutting proposal. The pre-tax cost reduction is expected to equal $8,500 for each of the five years of the project's life. The equipment has an initial cost of $28,000 and belongs to a 25% CCA class. The company is in 30% tax bracket, the project's discount rate is 12%, and its salvage value is zero. The equipment will be sold to another company at the end of year 5 for $4,500. What is the project's profitability index (PI)? (Use the half-year rule when calculating the CCA Tax Shield. I.E use 0.5 instead of 1.5) O a. 0.81 Ob. 0.84 O c. 0.92 O d. 0.98 1.03 e. Tamim Products is planning to invest in an equipment to implement a cost-cutting proposal. The pre-tax cost reduction is expected to equal $8,500 for each of the five years of the project's life. The equipment has an initial cost of $28,000 and belongs to a 25% CCA class. The company is in 30% tax bracket, the project's discount rate is 12%, and its salvage value is zero. The equipment will be sold to another company at the end of year 5 for $4,500. What is the project's profitability index (PI)? (Use the half-year rule when calculating the CCA Tax Shield. I.E use 0.5 instead of 1.5) O a. 0.81 Ob. 0.84 O c. 0.92 O d. 0.98 1.03 e.

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