(Appendix 8C)Lasater Corporation has provided the following information concerning a capital budgeting project: The company's tax rate is 35%.The company's after-tax discount rate is 15%.The project would require an investment of $10, 000 at the beginning of the project.This working capital would be released for use elsewhere at the end of the project.The company uses straight-line depreciation on all equipment. The total cash flow net of income taxes in year 2 is:
A)$62, 500
B)$36, 500
C)$50, 000
D)$80, 000

Question

(Appendix 8C)Lasater Corporation has provided the following information concerning a capital budgeting project:  The company's tax rate is 35%.The company's after-tax discount rate is 15%.The project would require an investment of $10, 000 at the beginning of the project.This working capital would be released for use elsewhere at the end of the project.The company uses straight-line depreciation on all equipment. The total cash flow net of income taxes in year 2 is:
A)$62, 500 
B)$36, 500 
C)$50, 000 
D)$80, 000

Quizplus · Accepted Answer

Depreciation expense = (Original cost - Salvage value)÷ Useful life
= ($120, 000 - $0)÷ 4 years = $30, 000 per year
 11eaa0c8_96b1_8183_9cb2_214d871c077b_TB2487_00

(Appendix 8C)Lasater Corporation Has Provided the Following Information Concerning a Capital