(solution) Lucarell Corporation has provided the following information concerning a capital budgeting project

(solution) Lucarell Corporation has provided the following information concerning a capital budgeting project

(Appendix 8C) Lucarell Corporation has provided the following information concerning a capital budgeting project: After-tax discount rate6%Tax rate35%Expected life of the project4Investment required in equipment$160,000Salvage value of equipment$0Working capital requirement$30,000Annual sales$420,000Annual cash operating expenses$310,000One-time renovation expense in year 3$40,000 The company uses straight-line depreciation on all equipment. The income tax expense in year 3 is: $24,500$14,000$10,500$38,500