(Appendix 13C) Bourland Corporation Is Considering a Capital Budgeting Project

question 97

Multiple Choice

(Appendix 13C) Bourland Corporation is considering a capital budgeting project that would require investing $80,000 in equipment with an expected life of 4 years and zero salvage value. Annual incremental sales would be $250,000 and annual incremental cash operating expenses would be $180,000. The project would also require a one-time renovation cost of $40,000 in year 3. The company's income tax rate is 30% and its after-tax discount rate is 8%. The company uses straight-line depreciation. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting.
-The income tax expense in year 2 is:

• A) $3,000
• B) $15,000
• C) $21,000
• D) $12,000

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Definitions:

Strategic Marketing Process

A systematic approach to identifying opportunities, developing marketing strategies, and implementing actions to achieve long-term marketing goals.

Industry Trends

Patterns or movements observed within a specific industry over time, indicating the general direction in which it is moving or evolving.

Implementation Phase

The stage in a project or plan where the outlined actions are actually executed or put into practice.

Strategic Marketing Process

The strategic marketing process is a systematic approach that organizations use to plan, develop, implement, and evaluate marketing strategies to achieve competitive advantage and meet market demands.