Selected financial data is provided for the 100-room Brooklyn Hotel as follows:

20X1 20X2 20X3 20X4 20X5 A. Budgeted pretax income (loss) <$50,000> ($20,000) $70,000 $100,000 + — $200,000 B. The cost of building and furnishings total $3,200,000 and is depreciated using straightline over a 40-year period. Assume a zero salvage value and that the expenditure is prior to 20X1.

C. Assume a tax rate of 30% and that any net operating losses (NOL) can be carried forward for up to 5 years. (NOL are shown in brackets in item A.) Further assume all income taxes are paid in the year to which they relate.