Williams Company Is Considering the Purchase of Equipment for $360,000

question 59

Multiple Choice

Williams Company is considering the purchase of equipment for $360,000.The equipment will have a ten year life with no terminal salvage value.Straight-line depreciation will be used for tax purposes.It is expected that the equipment will generate annual sales of $180,000 and annual production costs,exclusive of depreciation,of $120,000.The tax rate is 40%.What is the annual after-tax cash flow from the depreciation expense?

• A)$14,400 cash inflow
• B)$24,000 cash inflow
• C)$48,000 cash inflow
• D)Zero.There is no cash flow with depreciation.

---

Definitions:

Open Shops

Workplaces where joining a union is not a condition for employment, allowing for both union and non-union employees.

Pure Monopsony Power

A market condition where there is only one buyer for a product or service, giving that buyer significant control over prices.

Strike and Lockout

Labor disputes where employees refuse to work (strike) and employers prevent employees from working (lockout) to settle disagreements, typically over employment terms.

Union Shop

A workplace where new employees must join the union representing them within a certain period of time as a condition of their employment.