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Use the Following Information to Answer the Question(s)below

question 20

Multiple Choice

Use the following information to answer the question(s) below.
Two years ago,Krusty Krab Restaurant purchased a grill for $50,000.The owner,Eugene Krabs,has learned that a new grill is available that will cook Krabby Patties twice as fast as the existing grill.This new grill can be purchased for $80,000 and would be depreciated straight line over 8 years,after which it would have no salvage value.Eugene Krab expects that the new grill will produce EBITDA of $50,000 per year for the next eight years while the existing grill produces EBITDA of only $35,000 per year.The current grill is being depreciated straight line over its useful life of 10 years after which it will have no salvage value.All other operating expenses are identical for both grills.The existing grill can be sold to another restaurant now for $30,000.Krusty Krab's tax rate is 21%.
-The incremental cash flow that Krusty Krab will incur in year 1 if they elect to upgrade to the new grill is closest to:

Definitions:

Accounts Payable

Liabilities representing amounts owed to creditors for goods and services the company has received but not yet paid for.

Raw Materials Purchases

is the total cost of raw materials bought for production during a given period.

Direct Materials Purchase Budget

A financial plan that estimates the cost and quantity of raw materials required for production in a specific period.

Ending Inventories

The value of goods available for sale or use at the end of an accounting period.