Cost of equipment modifications Installation Depreciation Period Additional Sales Revenue Expenses Tax Rate 1,850,000 124,000 1,090,000 34% 40% Incremental Profits Depreciation Net Profit Before Taxes Taxes Net Profit After Taxes Incremental Operating Cash Flow 1 2 3 4 5 6 MACRS 5 Years Year Project A B C D 1 2 3 4 5 Cost 1,500,000 $ 1,000,000 $ 750,000 $ 850,000 $ Cash Flow Incremental Net Cash Flow Life of Project 267,857 5 222,222 6 214,286 4 354,167 3 -550,000 -350,000 -150,000 50,000 250,000 -1,050,000 500,000 200,000 200,000 200,000 200,000 Balance Payback Period Cost of equipment modifications Installation Depreciation Period Additional Sales Revenue Expenses Tax Rate 1,850,000 124,000 1,090,000 34% 40% Incremental Profits Depreciation Net Profit Before Taxes Taxes Net Profit After Taxes Incremental Operating Cash Flow 1 2 3 4 5 6 MACRS 5 Years Year Project A B C D 1 2 3 4 5 Cost 1,500,000 $ 1,000,000 $ 750,000 $ 850,000 $ Cash Flow Incremental Net Cash Flow Life of Project 267,857 5 222,222 6 214,286 4 354,167 3 -550,000 -350,000 -150,000 50,000 250,000 -1,050,000 500,000 200,000 200,000 200,000 200,000 Balance Payback Period