Rieben Corporation Is Considering a Capital Budgeting Project That Would

Multiple Choice

Rieben Corporation is considering a capital budgeting project that would involve investing $120,000 in equipment with an estimated useful life of 4 years and no salvage value at the end of the useful life. Annual incremental sales from the project would be $320,000 and the annual incremental cash operating expenses would be $220,000. A one-time renovation expense of $40,000 would be required in year 3. The company's income tax rate is 30%. The company uses straight-line depreciation on all equipment.
The income tax expense in year 3 is:

A) $9,000
B) $30,000
C) $12,000
D) $21,000