Stanton Inc

Multiple Choice

Stanton Inc. is considering the purchase of a new machine that will reduce manufacturing costs by $5,000 annually and increase earnings before depreciation and taxes by $6,000 annually. Stanton will use the Modified Accelerated Cost Recovery System (MACRS) method to depreciate the machine, and it has estimated the depreciation expense for the first year as $8,000. Which of the following is the supplemental operating cash flow for the first year? Stanton's marginal tax rate is 40 percent. 

A) $19,000
B) $7,800
C) $6,600
D) $9,800
E) $3,000