Question
LeBron Corporation is considering the purchase of an asset for $400,000. It is expected that the product manufactured by the equipment can be sold for
LeBron Corporation is considering the purchase of an asset for $400,000. It is expected that the product manufactured by the equipment can be sold for $150,000 and that there will be annual production costs, exclusive of depreciation, equal to $80,000. The asset will have a 10-year life, no terminal salvage value, and straight-line depreciation will be used for tax purposes. The tax rate applicable to LeBron Corporation is 30%. If the equipment is purchased, the total net after-tax effect on cash flows over the entire life of the investment is _____.
Select the correct response:
a. $210,000 inflow
b. $610,000 inflow
c. $90,000 inflow
d. $210,000 outflow
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