Answer Happy

Please use this information provided below to answer
both chapter 10 questions. This information will appear at
the beginning of both ch 10 questions and will not
change.
Your company is upgrading to more efficient production equipment
for your firm's only product. This upgrade was based on the
recommendations of a consulting firm the company hired at a cost of
$34,400. The new equipment will cost $2,000,000 and shipping
costs of $10,000 will be incurred. Because the industry is
changing rapidly, the equipment will be obsolete in 4 years so
there will be no salvage value. The new equipment will allow
you to make more of your product in the same amount of time.
As a result your total sales will
increase by $400,000 annually
and expenses will decrease by $260,000
annually. Because your production will be increasing,
inventory levels will need to be increased by $40,000 and accounts
receivable will also increase by $30,000. Rather than paying
your suppliers within 10 days, you will move to 30 day payments
which will increase accounts payable by $20,000. The
equipment will be depreciated for tax purposes at CCA rate of
20%. The company's tax rate is 40% and the company requires a
rate of return of 7% on all capital expenditure projects.
Determine the present value of the CCA tax shield
(PVCCATS).
(Please enter your answer with 2 decimal places. Do not
use commas or units).