Canadian Donuts is looking at a new investment opportunity,which will require the purchase of a capital asset of $1 million and additional raw materials inventory of $50,000.The project is expected to generate operating revenue of $750,000 per year,and the associated operating expenses are estimated at $350,000 per year.The project has a five-year economic life.This capital asset belongs to asset class 8,which has a CCA rate of 20 percent.What is the CCA expense for year 3?

Question

Quizplus · Accepted Answer

CCA₃ = $1,000,000*(1 - 20%/2)*(1 - 20%)*20% = $144,000

Canadian Donuts Is Looking at a New Investment Opportunity,which Will