A 2 Investment Cost Salvage Value Useful Life (years) 5 Annual Depreciation 5 Required Rate of Return on Investments 7 Sales B Variable Costs Fixed Costs (excluding Depreciation) 0 Tax Rate 1 2 Income Statement: B Investment 1 C Investment 2 $ 800,000 $ 600,000 80,000 $ 60,000 10 12 GA 72.000 45.000 10% 10% EA EA EA 500,000 $ 500,000 $ 200,000 $ 240,000 100,000 $ 120,000 35% 35% 3 Sales $ 500,000 $ 500,000 4 Variable Costs $ 200,000 $ 240.000 5 Contribution Margin $ 300,000 $ 260,000 6 Fixed Costs (excluding Depreciation) $ 100,000 $ 120,000 7 Depreciation $ 72,000 $ 45.000 8 Earnings Before Taxes $ 128,000 $ 95,000 9 Taxes 44.800 $ 33.250 0 Earnings After Taxes 83.200 $ 61.750 1 2 3 Annual After-Tax Cash Flow 4 Earnings After Taxes 5 Depreciation 6 Annual After-Tax Cash Flow $ 83,200 $ 61,750 $ 72.000 $ 45.000 $ 155.200 $ 106.750 7 8 9 After-Tax Cash Flow For Salvage Value 0 Market Value of Asset at the end of useful life 1 Book Value of Asset at the end of useful life 2 Gain (Loss) 3 Tax on Gain (Loss) 4 5 Cash from Sale of Asset 6 Tax on Sale 7 Net Cash from Sale of Asset $ 100,000 $ 40,000 D