Item47

Item 47

Build Corporation wants to purchase a new machine for $297,000. Management predicts that the machine can produce sales of $212,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $78,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Build's combined income tax rate is 50%. Management requires a minimum after-tax rate of return of 12% on all investments.

What is the amount of net income (after taxes) in Year 2 of the investment? Round to the nearest whole number.