Vernon-Nelson Chemicals Is Planning to Release a New Brand of Insecticide,Bee-Safe,that

question 40

Multiple Choice

Vernon-Nelson Chemicals is planning to release a new brand of insecticide,Bee-Safe,that will kill many insect pests but not harm useful pollinators.Buying new equipment to manufacture the product will cost $20 million,and there will be an additional $2 million cost to reconfigure existing plant.The equipment is expected to have a lifetime of eight years and will be depreciated by the straight-line method over its lifetime.The firm expects that they should be able to sell 1,500,000 gallons per year at a price of $52 per gallon.It will take $38 per gallon to manufacture and support the product.If Vernon-Nelson's marginal tax rate is 40%,what are the incremental earnings in year 3 of this project?

• A)$10.5 million
• B)$11.1 million
• C)$12.6 million
• D)$18.5 million

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Definitions:

Transverse Process

Lateral bony projections off the vertebrae to which muscles and ligaments attach, aiding in spinal movement and stability.

Cervical Vertebrae

The seven vertebrae in the human neck that support the head and allow for its movement.

External Urethral Sphincter

A muscle that controls the passage of urine through the urethra.

Ischial Ramus

The bony projection that extends from the ischium (part of the hip bone), connecting to the pubis, forming part of the pelvis structure.