Solution-Calculate the income tax expense in year

Calculate the income tax expense in year

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Question - Gutshall Corporation is considering a capital budgeting project that would involve investing $228,000 in equipment with an estimated useful life of 4 years and no salvage value at the end of the useful life. Annual incremental sales from the project would be $640,000 and the annual incremental cash operating expenses would be $490,000. A one-time renovation expense of $60,000 would be required in year 3. The project would require investing $26,000 of working capital in the project immediately, but this amount would be recovered at the end of the project in 4 years. The company's income tax rate is 30% and its after-tax discount rate is 13%.

The company uses straight-line depreciation on all equipment.

Calculate the income tax expense in year 3.

A. $9,900

B. $45,000

C. $19,200

D. $27,900

Reference no: EM131586678

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Calculate the income tax expense in year

Reference no: EM131586678

Reference no: EM131586678

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