Pique Corporation Wants to Purchase a New Machine for $300,000

question 65

Multiple Choice

Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique's combined income tax rate is 40%. Management requires a minimum after-tax rate of return of 10% on all investments.

What is the net after-tax cash inflow in Year 1 from the investment?

• A) $72,000.
• B) $96,000.
• C) $108,000.
• D) $112,000.
• E) $120,000.

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Definitions:

Skilled Workers

Individuals who have acquired special training, knowledge, and abilities to perform specific tasks.

Base-10 Number System

A numeral system that is based on ten, utilizing digits 0 through 9, and where each digit's place represents a power of ten.

English-Speaking Children

Children whose primary language of communication is English, affecting aspects of their linguistic, cognitive, and social development.

Number Words

Words that represent numbers or quantities, used in the development of numerical understanding in children.