Quip Corporation Wants to Purchase a New Machine for $300,000

Multiple Choice

Quip Corporation wants to purchase a new machine for $300,000. Management predicts that the machine will produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with an assumed residual (salvage) value of $50,000. Quip's combined income tax rate, t, is 40%.

What is the net after-tax cash inflow in Year 1 from the proposed investment, rounded to the nearest whole dollar?

A) $72,000.
B) $92,000.
C) $96,000.
D) $102,000.
E) $120,000.