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






Your posts are moderated
Related Questions
Question: (a) In the Strategic Planning Model, describe the various stages involved in the generation of capital projects in the public sector. (b) Outline the life cycle-co

Question: Explain: (a) the advantages and disadvantages, to a company, of debt finance over equity finance; (b) the reasons why a company may choose to issue preference s

Q. Evaluate Earning Yield plus Growth in Earning Method? Earning Yield plus Growth in Earning Method: - If the EPS of a company is likely to grow at a constant rate of growth t

From a practical point of view, the feasibility of the project for Maribyrnong Council can be divided into three elements which are: logistical, operational and legal issues. First

cost of capital, Financial Management The Nu-Nu Brothers Inc. (NNBI) has the following capital structure, which it considers to be optional: Debt 25% Preferred Stock 15% Common Equ

Q. Discuss the techniques to manage risks? Once risks have been identified and assessed, all techniques to manage the risk fall into one or more of the four major categories li

a) IPod -Line / Mass production is most suitable given that Apple can sell the standardised product to mass markets across the world. Only small variations to the production proces

The Total Investable Capital Market Portfolio According to a report prepared by McKinsey in January 2007, World financial assets including bonds, stocks, corporate debt securit

ON THE BASIS OF FUNCTIONS •Functional / Subsidiary budgets: A subsidiary budget is a budget of income or expenditure appropriate to or the responsibility of functions, like

Write an essay explaining that the quantities of goods and services that we can produce are limited by both our available resources and by technology. Assume we want to increase