Medina Company has a tax rate of 30 percent and is considering a capital project that will make the following annual contribution to operating income: Using the receipts and disbursements method,net cash inflows are

Question

Medina Company has a tax rate of 30 percent and is considering a capital project that will make the following annual contribution to operating income:  Using the receipts and disbursements method,net cash inflows are

Quizplus · Accepted Answer

To calculate net cash inflows, we need to subtract the cash outflows from the cash inflows of the project. As no information is given about cash outflows, we can assume they are zero. Therefore, the net cash inflows are equal to the annual contribution to operating income, which is $83,500. However, we need to consider the effect of taxes on this amount. Since the tax rate is 30 percent, the after-tax net cash inflows will be $83,500 * (1 - 0.3) = $58,450. Thus, the correct answer is C.

Medina Company Has a Tax Rate of 30 Percent and Is