Marc Corporation Wants to Purchase a New Machine for $400,000

question 2

Multiple Choice

Marc Corporation wants to purchase a new machine for $400,000.Management predicts that the machine can produce sales of $275,000 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 company uses MACRS for depreciation.The machine is considered as a 3-year property and is not expected to have any significant residual at the end of its useful years.Marc's income tax rate is 40%.Management requires a minimum of 10% return on all investments.A partial MACRS depreciation table is reproduced below.
What is the after-tax cash inflow in Year 1 from the investment (rounded to the nearest thousand) ?

• A)$62,000.
• B)$114,000.
• C)$170,000.
• D)$240,000.
• E)$37,000.

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Definitions:

Lost Profits

The potential revenue that a business did not earn due to an interruption, disruption, or another adverse event.

Resale

The act of selling an asset or item that was previously purchased, often occurring in secondary markets or through distributor networks.

Breaches

Incidents where laws, contracts, or promises are violated, leading to legal consequences.

Compensatory Damages

Financial reparations awarded to a plaintiff to compensate for loss, injury, or harm suffered due to the defendant's actions.