Benson Industries Is Adding a New Assembly Line Which Will

question 38

Multiple Choice

Benson Industries is adding a new assembly line which will increase annual sales by $980,000 and cash expenses by $535,001. The project will require an initial investment in equipment of $1.2 million. This equipment belongs in a 40% CCA class. The company has a marginal tax rate of 35%. What is the operating cash flow in the first year of the project using the tax shield approach?

• A) $205,250
• B) $289,250
• C) $314,500
• D) $347,500
• E) $373,250

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