Rogers Company purchased equipment for $30 000 in December of 2007.It is expected to generate $10 000 per year in additional revenue and $2000 per year in additional cash expenses beginning in 2008.Depreciation in 2008 will be $3000.The firm's tax rate is 40 per cent.What is the annual after-tax cash flow in 2008?

Question

Quizplus · Accepted Answer

Annual after-tax cash flow 
= (Additional revenue - Additional expenses - Depreciation) x (1 - Tax rate) 
= ($10 000 - $2 000 - $3 000) x (1 - 0.4) 
= $5 400

Therefore, the answer is C.

Rogers Company Purchased Equipment for $30 000 in December of 2007.It