AOS Industries Statement of Cash Flows for 2008

Consider the above statement of cash flows. In 2008, AOS Industries had contemplated buying a new warehouse for $3 million, the cost of which would be depreciated over 10 years. If AOS Industries has a tax rate of 25%, what would be the impact for the amount of cash held by AOS at the end of the 2008?
A) It would have $3,000,000 less cash at the end of 2008.
B) It would have $2,925,000 less cash at the end of 2008.
C) It would have $1,500,000 less cash at the end of 2008.
D) It would have an additional $7,500,000 in cash at the end of 2008.

Question

AOS Industries Statement of Cash Flows for 2008

Consider the above statement of cash flows. In 2008, AOS Industries had contemplated buying a new warehouse for $3 million, the cost of which would be depreciated over 10 years. If AOS Industries has a tax rate of 25%, what would be the impact for the amount of cash held by AOS at the end of the 2008?
A) It would have $3,000,000 less cash at the end of 2008. 
B) It would have $2,925,000 less cash at the end of 2008. 
C) It would have $1,500,000 less cash at the end of 2008. 
D) It would have an additional $7,500,000 in cash at the end of 2008.

Quizplus · Accepted Answer

B) -$3,000,000 + 300,000 × 25% = -$2,925,000