1. The cost of the new machine that VWC Inc. just purchased is $10,000. Assuming the machine will be put into the class 14 and the CCA rate is 30%. Given the corporate tax rate is 20%, what are the CCA tax shields at the end of year 1 and year 2? (Assuming the half-year rule applies)
a) $300.00 and $720.00.
b) $300.00 and $510.00.
c) $600.00 and $720.00.
d) $600.00 and $510.00.
e) None of the above
2. A government of Canada bond has a face value of $1,000. The coupon is paid semi-annually and the yield to maturity is 12%. How much would you pay for the bond if:
a) The coupon rate is 8% and the time to maturity is 20 years?
b) The coupon rate is 14% and the time to maturity is 15 years?