CORRECT ANSWER C. CALVIN’S INCREMENTAL CASH FLOWS IN YEAR 5 ARE...

288. - CMA EXAM SUPPORT PACKAGE 2
CMA EXAM SUPPORT PACKAGE 2

288.

Correct answer c. Calvin’s incremental cash flows in Year 5 are $26,000 as shown below.

Reduction in labor cost after tax: $30,000 x .6

= $18,000

Depreciation tax shield

($100,000 ÷ 5) x .4

= 8,000

$26,000