Bonomo Corporation has provided the following information concerning a capital budgeting project:

Tax rate		30	%
Expected life of the project		4
Investment required in equipment	$	94,000
Salvage value of equipment	$	0
Annual sales	$	220,000
Annual cash operating expenses	$	149,600
One-time renovation expense in year 3	$	25,000

The company uses straight-line depreciation on all equipment.

The income tax expense in year 3 is:

Multiple Choice

• $14,100

• $7,500

• $7,050