An expansion project involves the purchase of a new asset at a cost of $1,500,000, which will be depreciated as a 10-year asset under MACRS. The project is expected to yield annual net profits before depreciation and taxes of $250,000 over the 10-year useful life of the asset. The firm is subject to a 40 percent tax rate on ordinary income and on long-term capital gains. The annual incremental after-tax cash flow from operations for year 2 is _____________.

MACRS RATE Recovery 3 years 5 years 7 years 10 year

year

1 33% 20% 14% 10%

2 45 32 25 18

3 15 19 18 14

4 7 12 12 12

5 12 9 9

6 5 9 8

7 9 7

8 4 6

9 6

10 6

11 4

	a.	$210,000
	b.	$300,000
	c.	$60,000
	d.	$258,000