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Canadian Donuts is looking at a new investment opportunity, which will require the purchase of a...

Canadian Donuts is looking at a new investment opportunity, which will require the purchase of a capital asset of $1 million and additional raw materials inventory of $50,000. The project is expected to generate operating revenue of $750,000 per year, and the associated operating expenses are estimated at $350,000 per year. The project has a five-year economic life. This capital asset belongs to asset class 8, which has a CCA rate of 20 percent. What is the CCA expense for year 3?

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Answer #1

$128000

Book value at year 1 1000000
CCA year 1 @ 20% 200000
Book value at year 2 800000
CCA year 2 @ 20% 160000
Book value at year 3    640000
CCA year 3 @ 20% 128000
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