1. Find after-tax cash flows for a company with adjusted cost basis of $50,000,000. Company earns $20,000,000 by selling their own manufactured rubber products. They need to spend $8,000,000 each year to pay the workers and cover operation costs. The study period of 8 years is reasonable with end of study-period of $10,000,000 market value.

2. Management team imposed 5-year study period. Find after-tax cash flows with newly imposed study period. Write down all your assumptions.

3. Government suggested management team of this company to consider longer study periods. Management team ordered chief financial officer to find after-tax cash flows for study period of 10 years. Write down all your assumptions.

(Use applicable tax rate from Table 7-5.)

TABLE 7-5 Corporate Federal Income Tax Rates (2006) If Taxable Income Is: The Tax Is: Over But Not Over of the Amount Over $50,000 75,000 100,000 335,000 10,000,000 15,000,000 15,000,00018,333,333 $50,000 75,000 100,000 335,000 10,000,000 15% $7,500 + 25% 13,750 34% 22,250 + 39% 11 3,900 34% 3,400,000 + 35% 5,150,000 + 38% 35% $50,000 75,000 100,000 335,000 10,000,000 15,000,000 18,333,333 TABLE 7-5 Corporate Federal Income Tax Rates (2006) If Taxable Income Is: The Tax Is: Over But Not Over of the Amount Over $50,000 75,000 100,000 335,000 10,000,000 15,000,000 15,000,00018,333,333 $50,000 75,000 100,000 335,000 10,000,000 15% $7,500 + 25% 13,750 34% 22,250 + 39% 11 3,900 34% 3,400,000 + 35% 5,150,000 + 38% 35% $50,000 75,000 100,000 335,000 10,000,000 15,000,000 18,333,333