Annala Corporation is considering a capital budgeting project that would require investing $80,000 in equipment with an expected life of 4 years and zero salvage value. Annual incremental sales would be $250,000 and annual incremental cash operating expenses would be $180,000. The project would also require an immediate investment in working capital of $20,000 which would be released for use elsewhere at the end of the project. The company's income tax rate is 30% and its after-tax discount rate is 13%. The company uses straight-line depreciation. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. The income tax expense in year 2 is:
A. $15,000
B. $6,000
C. $75,000
D. $54,000
Answer: A
You might also like to view...
Exhibit 11-04 Kieso Company purchased a tract of land for $4,500,000 in anticipation of extracting 1,425,000 tons of ore. The residual value of the land is expected to be $480,000. The company mines 125,000 tons of ore in the first year. ? Refer to Exhibit 11-04, what is the unit depletion rate? (Round to the nearest $0.01.)
A) $3.16 B) $3.50 C) $2.82 D) $3.00
The audit documentation when performing an engagement quality review should include such information such as how much the firm paid for the review
a. True b. False Indicate whether the statement is true or false
A statement of retained earnings is not as informative as a statement of stockholders' equity
Indicate whether the statement is true or false
A high-level view of thoughts and ideas displayed in sequence through drawings, sketches, or illustrations is called a ______.
a. process flow b. highview c. storyboard d. pictogram