Claremore Candy Company (CCC) just bought a machine that is expected to generate $31001 in operating income before depreciation expenses each year. The machine, which has a depreciable basis of $83990, falls into the MACRS 3-year class.
What will be CCC's:
(a) After-tax operating income three years from now (year 3)?
(b) Operating cash flow this year (year 1)?
Assume that all sales and operating expenses, except depreciation, are cash. CCC's marginal tax rate is 26 percent.