Spherical Manufacturing recently spent $15 million to purchase some equipment used in the manufacture of disk drives. This equipment hasa CCA rate of 25% and Spherical's marginal corporate tax rate is 31%.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 12% 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 12% peryear?e. How might your answer to part (d) change if Spherical anticipates that its marginal corporate tax rate will increase substantially over thenext 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.)

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Spherical Manufacturing recently spent $15 million to purchase some equipment used in the manufacture of disk drives. This equipment has a CCA rate of 25% and Spherical's marginal corporate tax rate is 31%. 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 12% per year?

Spherical Manufacturing recently spent $15 million to purchase some equipment used in the manufacture of disk drives. This equipment has a CCA rate of 25% and Spherical's marginal corporate tax rate is 31%. 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 12% per year?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 8P

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