Tomlinson Industries Had Sales of $162 Million Last Year

Multiple Choice

Tomlinson Industries had sales of $162 million last year. It is analyzing the difference in cash flows between certain inventory valuation methods. It is looking at both the FIFO and replacement cost valuation methods. If FIFO is used, the inventory cost is $135 million, but if the replacement value method is used, the inventory cost is $157 million. The firm's marginal tax rate is 40 percent. If the LIFO method is used over the replacement value method, what is the change in net inflow the company would realize?

A) -$5.4 million
B) +$6.2 million
C) -$6.8 million
D) +$7.2 million
E) -$8.8 million