1. A brewery is considering adding a new line of craft beers to its product mix. The new beer will require additional brewing and bottling capacity at a cost of $15 million, but is expected to generate new sales of $5 million per year for the next 5 years. If the brewery has a cost of capital of 6%, what is the NPV of this investment?
A. $8.6 million
B. $15 million
C. $3.7 million
D. $6.1 million
E. $10 million
2. Longbow Lumber is purchasing a new horizontal resaw at a cost of $390,000. There is an additional $20,000 delivery and installation cost. The machine has a capital cost allowance (CCA) rate of 15%. What will be the CCA deduction for year 1?
A. $61,500
B. $29,250
C. $30,750
D. $205,000
E. $195,000
3. A restaurant invests $240,000 in a new food truck for mobile lunch sales. The truck will have a capital cost allowance (CCA) rate of 20%. If the opportunity cost of capital is 8.5%, and the restaurant's marginal tax rate is 30%, what is the present value of the CCA tax shield?
A. $48,000
B. $48,547
C. $35,938
D. $14,400
E. $50,526