Problem
Waverly Company is evaluating the purchase of a new machine that costs $720,000, will have a CCA rate of 20%, an estimated useful life of 8 years and a $50,000 terminal disposal price. The company's marginal tax rate is 34%. It is estimated that the machine will increase before tax profits by $180,000 annually. Montcalm requires a 10% after tax rate of return. Based on the above information, calculate the lost tax shield if the company disposes of this machine after 8 years.