Fontana Corporation Is Considering a Capital Budgeting Project That Would

Multiple Choice

Fontana Corporation is considering a capital budgeting project that would require investing $240,000 in equipment with an expected life of 4 years and zero salvage value. The annual incremental sales would be $640,000 and the annual incremental cash operating expenses would be $440,000. The company's income tax rate is 30%. The company uses straight-line depreciation on all equipment.The total cash flow net of income taxes in year 2 is:

A) $158,000
B) $200,000
C) $88,000
D) $140,000