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Use the following information to answer Questions 13 through 17 Management of Whistler Company is considering expanding its operations through the purchase of a blending machine costing $165,000. The tax and economic life of the asset is five years. The asset can be sold at the end of its life for $25,000. Depreciation is computed using the straight line method using no salvage value. Based on engineering and accounting studies, management believes the pretax increase in cash income will be as follows: Year 1, S65,000; Year 2, $73,000; Year 3, S85,000; Year 4, $98,000; and Year 5, $96,000. Federal and state income taxes have averaged 45% in the past and no change is expected in this rate. The company's after tax cost of capital is l 5% and the company expects all projects to pay back their initial investment in 3.5 years or less. 13. What is the annual depreciation tax shield for this investment? (a) S28,000. (b) $14,850. (c) S18,150. (d) S33,000. 14. What is the income after tax for Year 3? (a) S28,600. (b) $46,750. (c) S61,600 (d) $23,400. 15. What is the net cash inflow after tax for Year 4? (a) S68,750 (b) S53,900. (c) $98,000 (d) S62,250. 16. What will be the cash flow after tax that will be received from the sale of the machine at the end of its useful life? (a) S1,250 (b) 0 (c) $25,000. (d) S13,750

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