CORRECT ANSWER D. KELL’S 3RD YEAR CASH FLOWS ARE $800,000 AS SH...

304.

Correct answer d. Kell’s 3

^rd

year cash flows are $800,000 as shown below.

After tax cash inflows

($8,000,000 - $6,500,000 - $500,000) x .6

$600,000

Depreciation tax shield ($1,500,000 ÷ 3) x .4

200,000

Cash inflow

$800,000