(Appendix 8C)Kellog Corporation Is Considering a Capital Budgeting Project That

Multiple Choice

(Appendix 8C) Kellog Corporation is considering a capital budgeting project that would have a useful life of 4 years and would involve investing $160, 000 in equipment that would have zero salvage value at the end of the project.Annual incremental sales would be $390, 000 and annual cash operating expenses would be $260, 000.The company uses straight-line depreciation on all equipment.Its income tax rate is 35%. The income tax expense in year 2 is:

A) $7, 000
B) $45, 500
C) $31, 500
D) $24, 500