ENGR 301 - Assignment 8

Deadline: due 17:30 (5:30 pm), Monday April 11, 2016

Assignments must be submitted on-line using the multiple choice answer sheet
on the Moodle course website. No submissions will be accepted after the deadline.
Question 8-1
Ten years ago a machine cost $800,000. Now, the same machine costs $1,200,000. The average rate of
inflation per year is close to
3.7%

5.0%

4.1%

4.6%

Question 8-2
An investor bought a tax-free provincial bond, at a cost of $1000 which will pay $50 interest each year for
20 years. The bond will mature in 20 years and return the original $1000. If there is a 2% annual inflation
during this period, the real rate of return the investor will receive is close to
2.9%

2.5%

3.2%

4.0%

Question 8-3
A composite price index for the cost of vegetarian foods called eggs, artichokes, and tofu (EAT) was 330
ten years ago and has averaged an annual increase of 12% since. The current value of the index is close to
480

618

877

1025

Questions 8-4 8-6

Last year a local construction company had operating revenues of $1,240,000, operating costs of
$520,000 and a CCA of $98,000 based upon existing assets. The beginning of last year the company
bought essential new equipment for $130,000. This equipment has a CCA rate of 30%. The company has
borrowed money and is paying $18,000 per year in interest. Interest paid on borrowed money is tax
deductible, so it reduces the taxable income. Last years tax rate is 37.62%. When doing the taxation
analysis for last year:
8-4

total CCA is close to

$98,000

$137,000

$117,500

$135,500

8-5

taxable income is close to

$583,000

$565,000

$602,500

$584,500

8-6

after tax profit is close to

$352,450

$364,600

$363,275

$375,840