Stanton Inc. is considering the purchase of a new machine that will reduce manufacturing costs by $5,000 annually and increase earnings before depreciation and taxes by $6,000 annually. Stanton will use the Modified Accelerated Cost Recovery System (MACRS) method to depreciate the machine, and it has estimated the depreciation expense for the first year as $8,000. Which of the following is the supplemental operating cash flow for the first year? Stanton's marginal tax rate is 40 percent.
A. $19,000
B. $7,800
C. $6,600
D. $9,800
E. $3,000
Answer: D
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