Use the Information for the Question(s)below

question 83

Multiple Choice

Use the information for the question(s) below.
The Sisyphean Corporation is considering investing in a new cane manufacturing machine that has an estimated life of three years.The cost of the machine is $30,000 and the machine will be depreciated straight line over its three-year life to a residual value of $0.
The cane manufacturing machine will result in sales of 2000 canes in year 1.Sales are estimated to grow by 10% per year each year through year three.The price per cane that Sisyphean will charge its customers is $18 each and is to remain constant.The canes have a cost per unit to manufacture of $9 each.
Installation of the machine and the resulting increase in manufacturing capacity will require an increase in various net working capital accounts.It is estimated that the Sisyphean Corporation needs to hold 2% of its annual sales in cash,4% of its annual sales in accounts receivable,9% of its annual sales in inventory,and 6% of its annual sales in accounts payable.The firm is in the 35% tax bracket,and has a cost of capital of 10%.
-The amount of incremental income taxes that the Sisyphean Company will pay in the first year on this new project is closest to:

• A)$6300
• B)$5200
• C)$3500
• D)$2800

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Definitions:

Checkout Counter

The area in a store where customers pay for their purchases, typically equipped with a cash register or payment terminal.

Sales Associate

An employee in retail or other industries who assists customers with purchases, providing product information, and ensuring customer satisfaction.

Outside Order Taker

A sales role focused on receiving and processing orders from customers, typically not responsible for proactive selling or customer acquisition.

Inventory Clerk

A professional responsible for managing and maintaining a company's inventory, including receiving, recording, and distributing materials or products.