Lennox 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 8%.The project would require an investment of $20,000 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) $30,000
B) $26,500
C) $39,500
D) $50,000

Question

Lennox 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 8%.The project would require an investment of $20,000 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) $30,000 
B) $26,500 
C) $39,500 
D) $50,000

Quizplus · Accepted Answer

Depreciation expense = (Original cost - Salvage value) ÷ Useful life
= ($80,000 - $0) ÷ 4 years = $20,000 per year
 11ea7761_15d1_6a29_81a5_797f77514b21_TB2580_00

Lennox Corporation Has Provided the Following Information Concerning a Capital