Exercise 10-8A (Algo) Determining the cash flow annuity with income tax considerations LO 10-2 To open a new store, Gibson Tire Company plans to invest $295,000 in equipment expected to have a five-year useful life and no salvage value. Gibson expects the new store to generate annual cash revenues of $325,000 and to incur annual cash operating expenses of $185,000. Gibson's average income tax rate is 30 percent. The company uses straight-line depreciation Required Determine the expected annual net cash inflow from operations for each of the first four years after Gibson opens the new store. (Negative amounts should be indicated by a minus sign.) Net cash Inflow / Outflow Year 1 Year 2 Year 3 Year 4 Exercise 10-10A (Algo) Using the internal rate of return to compare investment opportunities LO 10-3 Velma and Keota (V&K) is a partnership that owns a small company. It is considering two alternative Investment opportunities. The first investment opportunity will have a four-year useful life will cost $13,606.82, and will generate expected cash inflows of $4,200 per year. The second investment is expected to have a useful life of four years, will cost $12,254.87, and will generate expected cash Inflows of $3,700 per year. Assume that V&K has the funds available to accept only one of the opportunities. (PV of Si and PVA of $1 (Use appropriate factor(s) from the tables provided.) Required a. Calculate the internal rate of return of each Investment opportunity. (Do not round intermediate calculations.) b. Based on the Internal rates of return, which opportunity should V&K select? Internal Roto of Return a First investment Second investment b. V&K should select the 96