What are the incremental earnings in year 3 of the project

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Reference no: EM13335781

Vernon-Nelson Chemicals is planning to release a new brand of insecticide, Bee-Safe, that will kill many insect pests but not harm useful pollinators. Buying new equipment to manufacture the product will cost $20 million and there will be an additional $2million cost to reconfigure the plant. The equipment is expected to have a lifetime of eight years and will be depreciated by the straight-line method over its lifetime. The firm expects that they should be able to sell 1,500,000 gallons per year at a price of $52 per gallon. It will take $38 per gallon to manufacture and support the product. If Vernon-Nelson's marginal tax rate is 40%, what are the incremental earnings in year 3 of this project?

Reference no: EM13335781

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