Gayheart Corporation Is Considering a Capital Budgeting Project That Would

Multiple Choice

Gayheart Corporation is considering a capital budgeting project that would require investing $80,000 in equipment with an expected life of 4 years and zero salvage value. The annual incremental sales would be $260,000 and the annual incremental cash operating expenses would be $190,000. The company's income tax rate is 30%. The company uses straight-line depreciation on all equipment. The total cash flow net of income taxes in year 2 is:

A) $50,000
B) $55,000
C) $70,000
D) $34,000