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A week ago
CathFoods will release a new range of candies which contain anti-oxidants. New equipment to manufacture the candy will cost $2 million, which will be depreciated by straight-line depreciation over five years. In addition, there will be $5 million spent on promoting the new candy line. It is expected that the range of candies will bring in revenues of $4 million per year for five years with production and support costs of $1.5 million per year. If CathFood's marginal tax rate is 35%, what are the incremental earnings in the second year of this project?

▸ $2.100 million

▸ $1.365 million

▸ $1.500 million

▸ $1.753 million
Textbook 
Fundamentals of Corporate Finance
Edition: 2nd
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$1.365 million
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