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Question 3
Marginal 40%
CCA Rate 20%
Discount 10%
Initial Cos 450,000
Annual Co 100,000
Useful Lif 10%
Salvage V 0.00
Year 0 1 2
Cash Inflows
Savings $100,000.00 $100,000.00
Cash Outflows
Initial Investment -450,000.00
Taxes 40,000.00 40,000.00
Net Cash Flow -$450,000.00 $60,000.00 $60,000.00
Discounted Cash Flow -$450,000.00 $54,545.45 $49,586.78
Tax Shield
CCA/(CCA+ROR) 0.6666666667
Half Year Rule 0.9545454545
PV of Tax Shield $114,545.45
NPV $33,219.48
3 4 5 6 7 8
$100,000.00 $100,000.00
40,000.00 40,000.00
$60,000.00 $60,000.00
$25,445.86 $23,132.60