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

question 88

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 3 is:

• A) $15,000
• B) $6,000
• C) $3,000
• D) $9,000

---

Definitions:

Biological Approach

A perspective in psychology that emphasizes the importance of physical processes in the body, such as genetic inheritance and neural function, in understanding human behavior.

Psychiatrist

A medical doctor specialized in diagnosing, treating, and preventing mental, emotional, and behavioral disorders.

Therapist

A professional trained to treat mental, emotional, and behavioral disorders through various psychotherapeutic methods.

Basic Research

Fundamental research aimed at gaining more comprehensive knowledge or understanding of the subject under study, without specific applications in mind.