A company has won a four- year contract to produce extraction equipment for the Athabasca Oil Sands project. It is buying $79.5 million worth of machinery for its Lachine, Quebec plant to be able to fulfill the order. The machinery is financed by a four-year loan at 8% per year, with the current portion of the principal and the interest, equaling $24 million, due at the end of each year. Salvage value is expected to be $29.3 million. If the company's tax rate is 32%, the capital cost allowance (CCA) rate is 25% and the discount rate is 8%, what is the net present value of the company's tax shield over the life of the contract?

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The Answer of A company has won a four- year contract to produce extraction equipment for the Athabasca Oil Sands project. It is buying $79.5 million worth of machinery for its Lachine, Quebec plant to be able to fulfill the order. The machinery is financed by a four-year loan at 8% per year, with the current portion of the principal and the interest, equaling $24 million, due at the end of each year. Salvage value is expected to be $29.3 million. If the company's tax rate is 32%, the capital cost allowance (CCA) rate is 25% and the discount rate is 8%, what is the net present value of the company's tax shield over the life of the contract?

A Company Has Won a Four- Year Contract to Produce