CathFoods Will Release a New Range of Candies Which Contain

question 95

Multiple Choice

CathFoods will release a new range of candies which contain anti-oxidants.New equipment to manufacture the candy will cost $2 million,which will be depreciated by straight-line depreciation over five years.In addition,there will be $5 million spent on promoting the new candy line.It is expected that the range of candies will bring in revenues of $4 million per year for five years with production and support costs of $1.5 million per year.If CathFood's marginal tax rate is 35%,what are the incremental earnings in the second year of this project?

• A)$1.365 million
• B)$1.500 million
• C)$1.753 million
• D)$2.100 million