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What is the annual after-tax cash flow

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Question - Considering the purchase of equipment for $400,000. The equipment will have a ten year life with no terminal salvage value. Straight-line depreciation will be used for tax purposes. It is expected that the equipment will generate annual sales of $200,000 and annual production costs, exclusive of depreciation, $120,000. The tax rate is 40%. What is the annual after-tax cash flow from the depreciation expense?

a. $80,000 cash inflow

b. $40,000 cash inflow

c. $48,000 cash inflow

d. $16,000 cash inflow

Reference no: EM132480514

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