Headwaters Ltd.is considering purchasing a new asset.It has a cost of $1,350,000, an expected 6 year life and a salvage value of $90,000.The equipment would qualify as a class 8 (20% CCA)asset and Headwaters has a required rate of return of 11% and an effective tax rate of 32%.Required:
Calculate the tax shields that are generated from the purchase of this asset.Assume the asset will be placed in a pool and the pool will continue upon disposition.For tax purposes the disposition will occur on day 1 of Year 7.What is the net tax effect of the asset acquisition?

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The Answer of Headwaters Ltd.is considering purchasing a new asset.It has a cost of $1,350,000, an expected 6 year life and a salvage value of $90,000.The equipment would qualify as a class 8 (20% CCA)asset and Headwaters has a required rate of return of 11% and an effective tax rate of 32%.Required:
Calculate the tax shields that are generated from the purchase of this asset.Assume the asset will be placed in a pool and the pool will continue upon disposition.For tax purposes the disposition will occur on day 1 of Year 7.What is the net tax effect of the asset acquisition?