Reference no: EM132158592

Questions -

Question 1) Elf Ltd. is considering a plan to modernize its toy assembly line. The modernization project will involve purchasing a new machine for $500,000. The machine has an expected useful life of nine years, after which it will have a zero expected salvage value. If the company purchases the new machine, the existing machine will be sold for $75,000 and have no salvage value in nine years. The applicable CCA rate for the machines is 15%, and the company's marginal tax rate is 30%. The half-year rule applies. What will the CCA tax shield for the second year of operation be if the company purchases the new machine?

A) $16,256

B) $17,691

C) $20,813

D) $58,969

Question 2) A real-estate development corporation purchased a piece of land outside Texas 10 years ago for $100,000. The company later spent $250,000 to clear and level the property. The company now has two options: it can sell the land today for $600,000 or convert the land into a strip mall. The company's marginal tax rate is 25%.

When estimating the NPV for the proposed strip mall, at what price should the company measure the cost of the land?

A) $100,000

B) $250,000

C) $568,750

D) $600,000