A Company Is Considering the Purchase of a New Machine

Multiple Choice

A company is considering the purchase of a new machine for $48,000. Management predicts that the machine can produce sales of $16,000 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $12,000 per year including depreciation of $3,000 per year. The company's tax rate is 40%.
- What is the annual cash flow for the new machine?

A) $4,000.
B) $2,400.
C) $7,000.
D) $5,400.
E) $1,600.