Telstar Communications is going to purchase an asset for $460,000 that will produce $220,000 per year for the next four years in earnings before depreciation and taxes.
The asset will be depreciated using the three-year MACRS depreciation schedule in Table 12-12.
(This represents four years of depreciation based on the half-year convention.) The firm is in a 35 percent tax bracket.
Fill in the schedule below for the next four years.
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Year 1 |
Year 2 |
Year 3 |
Year 4 |
| Earnings before depreciation and taxes |
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|
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| Depreciation |
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|
|
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| Earnings before taxes |
|
|
|
|
| Taxes |
|
|
|
|
| Earnings after taxes |
|
|
|
|
| Depreciation |
|
|
|
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| Cash flow |
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