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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