CathFoods will release a new range of candies which contain anti-oxidants. New equipment to manufacture the candy will cost which will be depreciated by straight-line depreciation over six years. In addition, there will be spent on promoting the new candy line. It is expected that the range of candies will bring in revenues of per year for five years with production and support costs of $1.5 million per year. If CathFoods' marginal tax rate is 35%, what are the incremental earnings in the second year of this project?

Question

CathFoods will release a new range of candies which contain anti-oxidants. New equipment to manufacture the candy will cost  which will be depreciated by straight-line depreciation over six years. In addition, there will be  spent on promoting the new candy line. It is expected that the range of candies will bring in revenues of  per year for five years with production and support costs of $1.5 million per year. If CathFoods' marginal tax rate is 35%, what are the incremental earnings in the second year of this project?

Quizplus · Accepted Answer

A) Depreciation = 4 / 6 = $0.66666667 million; earnings before 11ea84dc_f544_590b_9a63_ebca17a5a16e_TB1316_11_TB1316_11 earnings after 11ea84dc_f544_590c_9a63_3f44914597fe_TB1316_11_TB1316_11

CathFoods Will Release a New Range of Candies Which Contain