Telstar Communications is going to purchase an asset for $420,000 that will produce $200,000 per year...

Telstar Communications is going to purchase an asset for $420,000 that will produce $200,000 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 30 percent tax bracket. Fill in the schedule below for the next four years.

Earnings before depreciation and taxes year 1 year 2 year 3 year 4

depreciation

earnings before taxes

taxes

earnings after taxes

depreciation

cash flow

Expert Solution

Year	1	2	3	4
Earnings before depreciation and taxes	200000.00	200000.00	200000.00	200000.00
Depreciation	69993.00	186690.00	62202.00	31122.00
Earnings before tax	130007.00	13310.00	137798.00	168878.00
Taxes	39002.10	3993.00	41339.40	50663.40
Earnings after taxes	91004.90	9317.00	96458.60	118214.60
Depreciation	69993.00	186690.00	62202.00	31122.00
Cash flow	160997.90	196007.00	158660.60	149336.60

WORKINGS

jeff jeffy answered 1 year ago

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