Question

LargeTech Manufacturing has the following estimates for a new semiconductor product. The machinery costs $800K, and it will have no salvage value after 8 years. LargeTech is in the highest tax bracket. Income starts at $200K per year and increases by $100K per year, except that it falls by $300K per year in years 7 and 8. Expenses start at $225K per year and increase by $50K per year. What are the BTCFs and taxable income under: Straight-line depreciation?

Please show answer using excel

Answer 1

Before tax cash flow does not require effect of depreciation.

Particulars	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7	Year 8
Investment	(800,000)
Sales		200,000	300,000	400,000	500,000	600,000	700,000	400,000	100,000
Less: expenses	-	(225,000)	(275,000)	(325,000)	(375,000)	(425,000)	(475,000)	(525,000)	(575,000)
Before tax cash flow	(800,000)	(25,000)	25,000	75,000	125,000	175,000	225,000	(125,000)	(475,000)

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