Solve each of the following independent cases:

1. A printing company has decided to purchase a new printing press. Its old press will be sold for $10,000. (It has a book value of $25,000.) The new press will cost $50,000.

Assuming that the tax rate is 40%, compute the net after-tax cash outflow.

2. The Maintenance Department is purchasing new diagnostic equipment costing $30,000.

Additional cash expenses of $2,000 per year are required to operate the equipment.

MACRS depreciation will be used (five-year property qualification). Assuming a tax rate of 40%, prepare a schedule of after-tax cash flows for the first 4 years.

3. The projected income for a project during its first year of operation is given below:

Required:
Compute the following:

a. After-tax cash flow

b. After-tax cash flow from revenues

c. After-tax cash expenses

d. Cash inflow from the shielding effect of depreciation

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Cash revenues Less: Cash expenses Depreciation Net income before taxes. Less: Taxes Net income $120,000 (50,000) (20,000) $ 50,000 20,000 $ 30,000