Crossword Company is studying a capital project that will produce $600,000 of added sales revenue,$400,000 of additional cash operating expenses,and $50,000 of depreciation.Assuming a 30% income tax rate,the company's after-tax cash inflow (outflow)is:

Question

Quizplus · Accepted Answer

The after-tax cash inflow is calculated as follows: First, calculate the taxable income by subtracting cash operating expenses and depreciation from sales revenue: $600,000 - $400,000 - $50,000 = $150,000. Then, calculate the tax: $150,000 * 30% = $45,000. The net income after tax is $150,000 - $45,000 = $105,000. Finally, add back the non-cash depreciation expense to get the after-tax cash inflow: $105,000 + $50,000 = $155,000.

Crossword Company Is Studying a Capital Project That Will Produce