Blueteeth Incorporated plans to incur $306,000 of salaries expense and produce $560,000 of additional sales revenue if a capital project is implemented. Assuming a 23% tax rate, these two items collectively should appear in a capital budgeting analysis as:

Question

Quizplus · Accepted Answer

The net effect of the salaries expense and additional sales revenue is calculated as follows: Additional sales revenue ($560,000) minus salaries expense ($306,000) equals $254,000. After accounting for taxes (23%), the net inflow is $254,000 * (1 - 0.23) = $195,580.

Blueteeth Incorporated Plans to Incur $306,000 of Salaries Expense and Produce