Vernon-Nelson Chemicals is planning to release a new brand of insecticide, Bee-Safe,

that will kill many insect pests but not harm useful pollinators Buying new equipment to

manufacture the product will cost $25 million, and there will be an additional $5 million

cost to reconfigure existing plant. The equipment is expected to have a lifetime of ten

years and will be depreciated by the straight-line method over its lifetime. The $5

million building modification will be depreciated straight-line over 20 years. The firm

expects that they should be able to sell 2,000,000 gallons per year at a price of $60 per

gallon. It will take $36 per gallon to manufacture and support the product. If Vernon-

Nelson's marginal tax rate is 40%, what are the incremental earnings after tax in year 3

of this project?

a) $27.2 million

b) $14.2 million

c) $23.8 million

d) $48.0 million

e) $45.25 million