(Appendix 8C)Battaglia Corporation Is Considering a Capital Budgeting Project That

question 134

Multiple Choice

(Appendix 8C) Battaglia Corporation is considering a capital budgeting project that would require investing $240, 000 in equipment with an expected life of 4 years and zero salvage value.Annual incremental sales would be $620, 000 and annual incremental cash operating expenses would be $460, 000.The project would also require a one-time renovation cost of $80, 000 in year 3.The company's income tax rate is 30% and its after-tax discount rate is 7%.The company uses straight-line depreciation.Assume cash flows occur at the end of the year except for the initial investments.The company takes income taxes into account in its capital budgeting. The total cash flow net of income taxes in year 2 is:

• A)$160, 000
• B)$100, 000
• C)$130, 000
• D)$74, 000

---

Definitions:

Committee of Correspondence

Groups organized by the American colonies in the lead-up to the Revolutionary War for the purpose of coordinating written communication outside their colony.

Stamp Act

A 1765 British law that imposed a tax on the colonies by requiring them to purchase and use stamped paper for legal documents, newspapers, and other publications, leading to widespread protest in the American colonies.

Colonial Protests

Acts of resistance or demonstration by colonial populations against the policies, rules, or taxes imposed by colonial powers or governing entities.

Patrick Henry

An American attorney, planter, and orator best known for his declaration to the Second Virginia Convention: "Give me liberty, or give me death!"