Cameron, Inc. is contemplating the acquisition of some new equipment. The purchase price is $66,000. Assume that the CCA for works out to be 33.33 percent, 44.44 percent, 14.82 percent, and 7.41 percent of the value over years 1 to 4, respectively. The equipment will be worthless at the end of that time. The equipment can be leased for $18,000 a year. The firm can borrow money at 8.5 percent and has a 34 percent tax rate. What is the amount of the CCA tax shield in year 4?

Question

Quizplus · Accepted Answer

The Answer of Cameron, Inc. is contemplating the acquisition of some new equipment. The purchase price is $66,000. Assume that the CCA for works out to be 33.33 percent, 44.44 percent, 14.82 percent, and 7.41 percent of the value over years 1 to 4, respectively. The equipment will be worthless at the end of that time. The equipment can be leased for $18,000 a year. The firm can borrow money at 8.5 percent and has a 34 percent tax rate. What is the amount of the CCA tax shield in year 4?