Gable Company Is Considering the Purchase of a New $80,000

question 125

Multiple Choice

Gable Company is considering the purchase of a new $80,000 delivery van.The van will have a useful life of 5 years, no terminal salvage value, and tax depreciation will be calculated using the straight-line method.If the van is purchased, the company will be able to increase annual revenues by $90,000 per year for the life of the van, but out-of-pocket expenses will also increase by $60,000 per year.Assume a tax rate of 20% and a required after-tax rate of return equal to 10%.The annual net after-tax cash effect of operations, exclusive of depreciation, is an) _____inflow.

• A)$24,480
• B)$30,000
• C)$12,000
• D)$18,000

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Definitions:

Birds

Warm-blooded vertebrates with feathers, capable of flight, with a beak but no teeth, laying hard-shelled eggs.

Fishes

Aquatic, gill-bearing animals that lack limbs with digits, often covered in scales, and residing in both freshwater and saltwater environments.

Flatworm

A group of simple invertebrates known for their flat bodies, including both free-living and parasitic species like tapeworms.