1.) The Have A Wonderful Summer Company is considering a new computer system for the company that will cost $200,000. It is estimated that operating profits (before taxes) will increase by $80,000 per year for 5 years if the system is purchased.
The asset falls into the 5-year MACRS category (20%, 32%, 19%, 12%, 12%, 5% for years 1 through 6 respectively). Tax rate of the company is 40%.
a) In the capital budgeting analysis, what is the estimated net cash flow for end of Year 1?
b) End of Year 2?
2.)Using the information in the previous question, what are the operating net cash flows for Years 3, 4, and 5?
SHOW ALL WORK-STEP BY STEP
NOT IN A CHART- I REPEAT, NOT IN A CHART for each year's cash flows