Multiple Choice
A company with a tax rate of 32% is planning to acquire a $86 000 asset that has a 30% CCA rate.The company may purchase the asset or lease it. The cost of borrowing is 10%. The prospectivelessor has a 40% tax rate and a 6.5% cost of capital. Which of the following statements is correct about the present value of the tax shield on the CCA to the lessor compared to the present value of the tax shield to the lessee?
A) The value to the lessee is 126% of the value to the lessor
B) The value to the lessee is 96% of the value to the lessor
C) The value to the lessor is 105% of the value to the lessee
D) The value to the lessor is 126% of the value to the lessee
Correct Answer:
Verified
Correct Answer:
Verified
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