Williams Company Is Considering the Purchase of Equipment for $360,000

Multiple Choice

Williams Company is considering the purchase of equipment for $360,000.The equipment will have a ten year life with no terminal salvage value.Straight-line depreciation will be used for tax purposes.It is expected that the equipment will generate annual sales of $180,000 and annual production costs,exclusive of depreciation,of $120,000.The tax rate is 40%.What is the annual after-tax cash flow from the depreciation expense?

A) $14,400 cash inflow
B) $24,000 cash inflow
C) $48,000 cash inflow
D) Zero.There is no cash flow with depreciation.