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

question 19

Multiple Choice

(Appendix 8C) Gayheart Corporation is considering a capital budgeting project that would require investing $80, 000 in equipment with an expected life of 4 years and zero salvage value.The annual incremental sales would be $260, 000 and the annual incremental cash operating expenses would be $190, 000.The company's income tax rate is 30%.The company uses straight-line depreciation on all equipment. The total cash flow net of income taxes in year 2 is:

• A)$50, 000
• B)$55, 000
• C)$70, 000
• D)$34, 000