Helfen 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 13%. The working capital would be required immediately and would be released for use elsewhere at the end of the project. 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)$14,000
B)$77,000
C)$10,500
D)$101,500

Question

Helfen 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 13%. The working capital would be required immediately and would be released for use elsewhere at the end of the project. 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)$14,000 
B)$77,000 
C)$10,500 
D)$101,500

Quizplus · Accepted Answer

The income tax expense in year 2 is $14,000. This is calculated by multiplying the taxable income of $70,000 by the tax rate of 20%.

Helfen Corporation Has Provided the Following Information Concerning a Capital