(Appendix 13C) Planas Corporation has provided the following information concerning a capital budgeting project:
The company's income tax rate is 35% and its after-tax discount rate is 14%. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting.
-The income tax expense in year 2 is:
A) $21,000
B) $10,500
C) $14,000
D) $3,500

Question

(Appendix 13C) Planas Corporation has provided the following information concerning a capital budgeting project:
  The company's income tax rate is 35% and its after-tax discount rate is 14%. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting.
-The income tax expense in year 2 is:
A) $21,000 
B) $10,500 
C) $14,000 
D) $3,500

Quizplus · Accepted Answer

Depreciation expense = (Original cost - Salvage value) ÷ Useful life
= ($80,000 - $0) ÷ 4 years = $20,000 per year
 11ea7761_15e1_961f_81a5_27370f0e7590_TB2580_00

(Appendix 13C) Planas Corporation Has Provided the Following Information Concerning