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

question 44

Multiple Choice

Dixie 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 net annual after-tax cash flow from the equipment?

• A) $14,400 cash inflow
• B) $24,000 cash inflow
• C) $36,000 cash inflow
• D) $50,400 cash inflow

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