Problem:
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. 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.
Required:
Question: If CathFood's marginal tax rate is 35%, what are the incremental earnings in the second year of this project?
A) $1.365 million
B) $1.500 million
C) $1.753 million
D) $2.100 million
Note: Please explain comprehensively and give step by step solution.