Hartsfield Company is considering purchasing a set of machine tools at a cost of

$40,000. The purchase is expected to generate increased sales of $30,000 per year

but also increased operating costs of $12,000 per year in each of the next three

years. Additional profits will be taxed at a rate of 40%. The asset falls into CCA Class

43 (rate = 30%) for tax purposes and the 50% rule applies. The project has a three-

year life with $5,000 salvage value. The general inflation rate is 10% annually (and

affects everything that it normally affects).

Assume a MARR' = 7% .

1) The disposal tax effect on your cash flow statement shows (in actual dollars)

a) 4664

b) (3488)

c) (4664)

d) (4002)

e) 4002