Coache Corporation Is Considering a Capital Budgeting Project That Would

question 198

Multiple Choice

Coache Corporation is considering a capital budgeting project that would require an investment of $120,000 in equipment with a 4 year useful life and zero salvage value. The annual incremental sales would be $310,000 and the annual incremental cash operating expenses would be $230,000. In addition, there would be a one-time renovation expense in year 3 of $30,000. The company's income tax rate is 30%. The company uses straight-line depreciation on all equipment.The total cash flow net of income taxes in year 3 is:

• A) $44,000
• B) $35,000
• C) $65,000
• D) $50,000

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