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Cassie Garner
on Dec 17, 2024

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Coache Corporation is considering a capital budgeting project that would require an investment of $340,000 in equipment with a 4 year useful life and zero salvage value. The annual incremental sales would be $740,000 and the annual incremental cash operating expenses would be $460,000. In addition, there would be a one-time renovation expense in year 3 of $41,000. 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 3 is:

A) $192,800
B) $239,000
C) $124,650
D) $165,650

Incremental Sales

The additional revenue generated from a particular marketing or sales activity, beyond the ordinary sales figures.

Cash Operating Expenses

Expenses that a company must pay out in cash, such as salaries, utilities, and rent, related to its operational activities.

  • Estimate the cost of income tax and the net cash inflows or outflows resulting from long-term investment projects.
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AK
Abhay KrishnaDec 21, 2024
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