1.Working capital cash flow.

Cool Water, Inc. sells bottled water. The firm keeps in inventory plastic bottles at 10% of the monthly projected sales. These plastic bottles cost $0.004 each. The monthly sales for the first four months of the coming year are as follows:

January:2,000,000
February:2,500,000
March:2,700,000
April:3,200,000

What is the monthly increase or decrease in cash flow for inventory given that an increase is a use of cash and a decrease is a source of cash?Note:Enter a decrease as a negative number.

a.What is the change in working capital for January?

b.What is the change in working capital for February ?

c.What is the change in working capital for March?

2. Depreciation expense. Richardses' Tree Farm, Inc. has just purchased a new aerial tree trimmer for $95,000. Calculate the depreciation schedule using a seven-year life (for the property class category of a single-purpose agricultural and horticultural structure from Table 10.3) for both straight-line depreciation and MACRS,

Use the half-year convention for both methods. Compare the depreciation schedules before and after taxes using a 40% tax rate. What do you notice about the difference between these two methods?

Year	3-Year	5-Year	7-Year	10-Year
1	33.33%	20.00%	14.29%	10.00%
2	44.45%	32.00%	24.49%	18.00%
3	14.81%	19.20%	17.49%	14.40%
4	7.41%	11.52%	12.49%	11.52%
5		11.52%	8.93%	9.22%
6		5.76%	8.93%	7.37%
7			8.93%	6.55%
8			4.45%	6.55%
9				6.55%
10				6.55%
11				3.28%