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Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can...

Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique's combined income tax rate is 40%. Management requires a minimum after-tax rate of return of 10% on all investments.

What is the amount of net income (after taxes) in Year 2 of the investment? Round to the nearest whole number.

Multiple Choice

  • $36,000.

  • $48,000.

  • $60,000.

  • $120,000.

  • $24,000.

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