Question
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LargeTech Manufacturing has the following estimates for a new semiconductor product. The machinery costs $800K, and...
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
Solutions
Expert Solution
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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