Garrison requires all investments to eam a 12% after-tax rate of return to be accepted. Garrison is subject to a marginal income tax rate of 40% on all income and gains (losses), Year The new machine will have depreciation as follows: Depreciation 2003 $ 250,000 2004 380,000 2005 370,000 $1,000,000 (220 Assume that Garrison is not subject to income taxes. The present value of the depreciation tax shield for 2004 is A. $182,400 B. $121,600 C. $109,440 D. $114,304 24 Kore Industries is analyzing a capital investment proposal for new equipment to produce a product over the next 8 years. The analyst is attempting to determine the appropriate "end-of-life" cash flows for the analysis. At the end of 8 years, the equipment must be removed from the plant and will have a net book value of zero, a tax basis of $75,000, a cost to remove of $40,000, and scrap salvage value of $10,000. Kore's effective tax rate is 40%. What is the appropriate "end-of-life" cash flow related to these items that should be used in the analysis? A. $45,000 B. $27,000 C. $12,000 D. $(18,000) Garfield, Inc. is considering a 10-year capital investment project with forecasted revenues of $40,000 per year and forecasted cash operating expenses of $29,000 per year. The initial cost of the equipment for the project is $23,000, and Garfield expects to sell the equipment for $9,000 at the end of the tenth year. The equipment will be depreciated over 7 years. The project requires a working capital investment of $7,000 at its inception and another $5,000 at the end of year 5. Assuming a 40% marginal tax rate, the expected net cash flow from the project in the tenth year is A. $32,000 B. $24,000 C. $20,000 D. $11,000 Page 7 of 9