2. An international company is comparing after-tax cash flows for competing projects with depreciable assets in two countries. The depreciation method and project financial information in each country is tabulated below. (a) Calculate the deprecation, taxable income and taxes in each year 0 through year 6 for both countries and fill out a CFAT analysis table for each country using the suggested economic analysis column headings below. You may add columns to the tax table if you wish. (b) Find the total present worth of the after-tax cash flows for years 1-6 for each country if after-tax MARR is 8% for both countries. The company uses an effective tax rate of 25% for income tax calculations in both countries.

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Practice or Estimate Country 1 Country 2 Depreciation Method MACRS with n = 5 DDB with n = = 5 Capital Gain, Capital Loss, or Depreciation Recapture Taxed as TI Taxed as TI First Cost, $ - 100,000 - 100,000 Gross income-expenses (GI-E), $/year, for years 1-6 25,000 25,000 Estimated salvage, $ O in year 5 10,000 in year 5 Life, years 5 5 Actual selling price, $ 20,000 in year 5 20,000 in year 5 Tax Table with Suggested Economic Analysis Headings: Year GI-E, $ P and S, $ D, $ TI, $ Taxes, $ CFAT, $ O 1 N 3 4. 6 Practice or Estimate Country 1 Country 2 Depreciation Method MACRS with n = 5 DDB with n = = 5 Capital Gain, Capital Loss, or Depreciation Recapture Taxed as TI Taxed as TI First Cost, $ - 100,000 - 100,000 Gross income-expenses (GI-E), $/year, for years 1-6 25,000 25,000 Estimated salvage, $ O in year 5 10,000 in year 5 Life, years 5 5 Actual selling price, $ 20,000 in year 5 20,000 in year 5 Tax Table with Suggested Economic Analysis Headings: Year GI-E, $ P and S, $ D, $ TI, $ Taxes, $ CFAT, $ O 1 N 3 4. 6