Marc Corporation Wants to Purchase a New Machine for $400,000

Multiple Choice

Marc Corporation wants to purchase a new machine for $400,000. Management predicts that the machine will produce sales of $275,000 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 company uses MACRS for depreciation. The machine is considered to be a 3-year property and is not expected to have any significant residual value at the end of its useful life. Marc's combined income tax rate, t, is 40%. Management requires a minimum after-tax rate of return of 10% on all investments. A partial MACRS depreciation table is reproduced below.What is the after-tax cash inflow in Year 1 from the proposed investment (rounded to the nearest thousand) ?

A) $62,000.
B) $114,000.
C) $170,000.
D) $240,000.
E) $37,000.