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.

---

Definitions:

Germ Cells

The reproductive cells in an organism that give rise to gametes (sperm and eggs).

Ovulation

The phase in the menstrual cycle when a mature egg is released from the ovary, making it available for fertilization.

Ovary

One of the pair of female reproductive organs that produce eggs and secrete hormones, including estrogen and progesterone.

Reproductive Life

Refers to the period in a person's life when they are able to conceive or father children.