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1.Libby just expanded her restaurant. She projects revenue will reach $35,000 for the new restaurant in the first year and increase by 25% over the

1.Libby just expanded her restaurant. She projects revenue will reach $35,000 for the new restaurant in the first year and increase by 25% over the next three years. Expenses are 75% of sales. The initial cost of the new restaurant is $40,000 (depreciable over 7 years using MACRS) and her tax rate is 21%. What are annual cash flows for year 1, year 2, and year 3?

2. How are taxes and depreciation handled differently when calculating operating cash flows?

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1 Calculation of Annual Cash Flows for Year 1 Year 2 and Year 3 a Year 1 Revenue for Year 1 35000 Expenses 75 of sales 75 35000 26250 Net Income befor... blur-text-image

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