Problemcathfoods will release a new range of candies which, Ask an Expert

Accounting

Problem:

CathFoods will release a new range of candies which contain anti-oxidants. New equipment to manufacture the candy will cost $2 million, which will be depreciated by straight-line depreciation over five years. It is expected that the range of candies will bring in revenues of $4 million per year for five years with production and support costs of $1.5 million per year.

Required:

Question: If CathFood's marginal tax rate is 35%, what are the incremental earnings in the second year of this project?

A) $1.365 million

B) $1.500 million

C) $1.753 million

D) $2.100 million

Note: Please explain comprehensively and give step by step solution.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91166092

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