(Appendix 8C)Freiman Corporation Is Considering Investing in a Project That

Multiple Choice

(Appendix 8C) Freiman Corporation is considering investing in a project that would have a 4 year expected useful life.The company would need to invest $160, 000 in equipment that will have zero salvage value at the end of the project.Annual incremental sales would be $390, 000 and annual cash operating expenses would be $270, 000.In year 3 the company would have to incur one-time renovation expenses of $70, 000.Working capital in the amount of $10, 000 would be required.The working capital would be released for use elsewhere at the end of the project.The company uses straight-line depreciation on all equipment. The income tax expense in year 2 is:

A) $24, 000
B) $21, 000
C) $36, 000
D) $3, 000