Question
5. Taxes A company wishes to predict its tax flow for planning purposes. It will use an income tax rate of 25% for estimation
5. Taxes A company wishes to predict its tax flow for planning purposes. It will use an income tax rate of 25% for estimation purposes. It will have an estimated gross income of 500,000 per year every year. It will make a large deductible capital expense at t=0 for 100,000. The asset will be depreciated using a rate such that its book value is equal to its salvage value of 20,000 after five years. The principal payment on the loan for the equipment is 18000 per year, the interest payments are 3500 per year. Operating expenses are 85,000 per year. Estimate the cash flow after taxes for each year for the first four years.
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