Alexandria Books opened a new, highly automated calendar printing line at the be

Question

Alexandria Books opened a new, highly automated calendar printing line at the beginning of last year in a building it previously owned. The new printing equipment cost $98,000. The applicable MACRS depreciation rates are 33%, 45%, 15% and 7% in Years 1 through 4, respectively. The fixed operating costs of the plant are $24,000 per year. Variable costs are $0.67 per calendar. The company's combined state and federal income tax rate is 40 percent. It expects to sell 91,000 calendars at a per-unit price of $1.70 in this, the second year of production.
Calculate the project's earnings before interest and tax (EBIT) in Year 2, assuming that the anticipated level of sales materializes.

Explanation / Answer

answer is 25630

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cost = 98000











Sales - cost - depreciation Depreciation Depreciation Fixed cost Variable Cost Sales Tax EBIT 33% 32340 24000



45% 44100 24000 60970 154700 10252 25630 15% 14700 24000



7% 6860 24000

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