Sunrise Company has a tax rate of 40% and a required rate of return of 12%.The company has new equipment that saves $100,000 per year in labor costs.What is the annual after-tax cash flow from the labor cost savings?

Question

Quizplus · Accepted Answer

The annual after-tax cash flow from the labor cost savings can be calculated using the following formula:
Annual after-tax cash flow = (Savings in labor costs)*(1-tax rate)
= $100,000*(1-0.4) = $60,000
Therefore, the annual after-tax cash flow from the labor cost savings is $60,000, which is a cash inflow. Hence, the correct answer is option D.

Sunrise Company Has a Tax Rate of 40% and a Required