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What are the incremental earnings in the second year

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Point 1: CathFoods will release a new range of candies which contain anti-oxidants. New equipment to manufacture the candy will cost $4 million which will be depreciated by straight-line depreciation over six years. In addition, there will be $ 5 million spent on promoting the new candy line. It is expected that the range of candies will bring in revenues of $6 million per year for five years with production and support costs of $1.5 million per year.

Question 1: If CathFood's marginal tax rate is 35%, what are the incremental earnings in the second year of this project?

Reference no: EM132484243

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