Question

The Sisyphean Corporation is considering investing in a new cane manufacturing machine that has an estimated life of three years.The cost of the machine is $30,000 and the machine will

be depreciated straight line over its three-year life to a residual value of $0. The cane manufacturing machine will result in sales of 2000 canes in year 1. Sales are estimated to grow by 10% per year each year through year three. The price per cane that Sisyphean will charge its customers is $18 each and is to remain constant. The canes have a cost per unit to manufacture of $9 each.The firm is in the 35% tax bracket, and has a cost of capital of 10%.The incremental EBIT in the first year for the Sisyphean Corporation's project is closest to: A. $18,000 B. $8000 C. $11,700 D. $5200

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