A restaurant invests $240,000 in a new food truck for mobile lunch sales.The truck will have a capital cost allowance (CCA)rate of 20%.The opportunity cost of capital is 8.5%,and the restaurant's marginal tax rate is 30%.If the company sells the truck at the end of 5 years for $120,000,what is the present value of the lost CCA tax shields from the sale of the asset?

Question

Quizplus · Accepted Answer

The present value of the lost CCA tax shields is calculated by considering the tax shield lost due to the sale of the asset, which is the difference between the undepreciated capital cost (UCC) and the sale price, multiplied by the tax rate and discounted at the opportunity cost of capital.

A Restaurant Invests $240,000 in a New Food Truck for Mobile