Calculate the total present value of the tax shield, Financial Management

Nortel is considering the purchase of a new  call routing system.  The system will cost $50M to purchase, an additional $7M to install, and will last for 30 years.  The CCA rate associated with the system is 6%, the firm's margin tax rate is 20%, and the firm's WACC is 9%. a.  Using Excel, create a CCA table, as in class for the 30 year life of the asset.  Assume that the asset is sold for its UCC at the end of year 30.

b.  Add a column that shows the value of the annual tax shield.

c.  Add a column that shows the PV of the annual tax shield.

d.  Calculate the total PV of the tax shield in Excel.

e.  Calculate the PV of the tax shield using the PVCCA formula.

Posted Date: 2/15/2013 7:36:42 AM | Location : United States







Related Discussions:- Calculate the total present value of the tax shield, Assignment Help, Ask Question on Calculate the total present value of the tax shield, Get Answer, Expert's Help, Calculate the total present value of the tax shield Discussions

Write discussion on Calculate the total present value of the tax shield
Your posts are moderated
Related Questions
PEST analysis Political for instance political culture, bureaucracy of regulating competition Economic for instance exchange rates, interest rates, taxation or busines

Explain the challenges before an E-business management

Describe the benefits of Wealth maximisation criterion Value of an asset must be viewed in terms of the benefits it can produce. Worth of a course of action can similarly be ju

LENDING RATES IN THE CREDIT MARKET One of the crucial decisions involved while extending loans is the lending rate. Intermediaries will base their lending rate decisions on thr

There are some misconceptions about securitization: Poor quality originators end up in securitizing their assets. A bank's best mortgage

Q. What are the Motives of Holding Cash? Motives of Holding Cash: - In every business assets are kept for the reason that they generate profit. But cash is an asset which doesn

Exchange Rates The prices at which one country's currency can be changed into that of other country. Although perceptions in the currency markets of the privacy of a count

The current spot exchange rate is Dr240/$1.00. Long-run inflation in Greece is calculated at 8 percent yearly and 4.5% in the United States.  If PPP is expected to hold among the t

Securitization refers to conversion of illiquid assets to liquid assets by converting longer duration cash flows into shorter duration ones. Securitization denote

Discuss the benefits and drawbacks of maintaining multiple manufacturing sites like a hedge against exchange rate exposure. Answer:  To set up multiple manufacturing sites can