Q1

Hammer Corporation wants to purchase a new machine for $298,000. Management predicts that the machine will produce sales of $205,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $68,000 per year. The firm uses straight-line depreciation with an assumed residual (salvage) value of $50,000. Hammer's combined income tax rate, t, is 40%.

What is the expected net income (after tax) in Year 3 if the proposed investment is undertaken? Round answer to nearest whole dollar.