Spherncal Manufacturing reoenty spent $14 milion to purchase some equipment used in the manufacture of dsk drives. This equipment has a CCA rate of 20% and Bphericals marginal corporate tax rate in35%a. What are he annual CCA deductions associated with this equipment for the fiest five years?b. What are the annual CCA tax shields for the first five years?e. What is the present value of the first five CCA tax shields if the appropriate discount rate is 12% per year?d. What is the prosent value of alt the CCA tax shieids assuming the equiment is never sold and the appropriate discount rate is 12% per yea?e. How might your answer to part (d) change if Spherical anticipates that ts marginal corporate tax rate will increase substantialy over the next five years?a. What are the annual CCA deductions associated with this equipment for the first five years?The CCA deduction for year 1 is S (Round to the nearest dolar.)

Depreciation: It is a charge on the tangible or physical asset for the decline in the value of the…

What are the annual CCA deductions associated with this equipment for the fest five years? b. What are the annual CCA tax shields for the first five years? EWhat is the present value of the firat five CCA tax shields ifhe appropriate dacount rate is 12% per year?

What are the annual CCA deductions associated with this equipment for the fest five years? b. What are the annual CCA tax shields for the first five years? EWhat is the present value of the firat five CCA tax shields ifhe appropriate dacount rate is 12% per year?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 11P

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Spherical Manufacturing recently spent $11 million to purchase some equipment used in the manufacture of disk drives. This equipment has a CCA rate of 45% and Spherical's marginal corporate tax rate is 37%. a. What are the annual CCA deductions associated with this equipment for the first five years? b. What are the annual CCA tax shields for the first five years? c. What is the present value of the first five CCA tax shields if the appropriate discount rate is 10% per year? d. What is the present value of all the CCA tax shields assuming the equiment is never sold and the appropriate discount rate is 10% per year? e. How might your answer to part (d) change if Spherical anticipates that its marginal corporate tax rate will increase substantially over the next five years? a. What are the annual CCA deductions associated with this equipment for the first five years? The CCA deduction for year 1 is $ (Round to the nearest dollar.) The CCA deduction for year 2 is $ The CCA deduction for…
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