Tiny Tots Inc. wishes to expand the company's business by purchasing new equipment costing $78,000. The CCA
Fantastic news! We've Found the answer you've been seeking!
Question:
- Tiny Tots Inc. wishes to expand the company's business by purchasing new equipment costing $78,000. The CCA rate on the equipment is 23%. In 8 years, the equipment can be sold for $18,200. When this project is over, there will still be other assets in the CCA class. The new equipment is expected to save $24,000before taxes per year and is expected to increase working capital in the first year by $22,100. This is a one-time increase in working capital and will be recovered at the end of the project.
What is the NPV of this project?The relevant discount rate is 7.8% and the corporate tax rate is 27%? Assume that current CCA rules apply.
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date: