Bowers Company plans to incur $190,000 of salaries expense and produce $320,000 of additional sales revenue if a capital project is implemented. Assuming a 30% tax rate, these two items collectively should appear in a capital budgeting analysis as:

Question

Quizplus · Accepted Answer

The net effect on cash flow is calculated by taking the additional sales revenue minus the salaries expense, and then adjusting for taxes: ($320,000 - $190,000) * (1 - 0.30) = $91,000 inflow.

Bowers Company Plans to Incur $190,000 of Salaries Expense and Produce