Solved: Present value of the perpetual cca tax shield, Accounting Basics

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Present value of the perpetual cca tax shield

Problem:

A machine with a CCA rate of 20% is purchased for $75,000 by a company with a marginal corporate tax rate of 40%. The expectation is that the machine could be sold after 10 years for $10,000. If the company has a required rate of return of 10%, what is the preset value of the perpetual CCA tax shield assuming the asset is not sold?

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Accounting Basics: Present value of the perpetual cca tax shield

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