Eureka Company is considering replacing an old computer with a new computer. The following data relate to this investment decision:

The new computer will belong to Class 10 with a maximum CCA rate of 30%. The income tax rate is also 30%, and the company's after-tax cost of capital is 12%
-What is the approximate present value of the tax savings for all years because of the CCA tax shield?

Question

Eureka Company is considering replacing an old computer with a new computer. The following data relate to this investment decision:

The new computer will belong to Class 10 with a maximum CCA rate of 30%. The income tax rate is also 30%, and the company's after-tax cost of capital is 12%
-What is the approximate present value of the tax savings for all years because of the CCA tax shield?

Quizplus · Accepted Answer

The present value of the tax savings from the CCA tax shield is calculated by discounting the tax savings over the years. The correct choice is based on the given options and typical calculations for such a scenario.

Eureka Company Is Considering Replacing an Old Computer with a New