4. A large corporation subjected to 21% marginal tax is investing in a new income producing...

4. A large corporation subjected to 21% marginal tax is investing in a new income producing asset that is depreciated on a MACRS 5 year schedule. The full price of the asset is 300,000 but the asset will be financed at an interest rate of 7.00% over 5 years after a down payment of 15%. The expected revenue and costs by year are given below. When retired, the asset will have no value. Year 1 2 3 4 5 6 Direct Revenue 120,000 280,000 360,000 320,000 210,000 90,000 Direct and Allocated Cost 85,000 120,000 160,000 150,000 110,000 65,000 Prepare a net after tax cash flow (ATCF) statement / exhibit for all 6 years of the new asset. a. What is the net cash flow in year 2? b. What is the net cash flow in year 5? c. What is the PW of the net cash flow applying an interest rate of 12.0%?

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