Exercise 16-8 Determining the cash flow annuity with income tax considerations LO 16-2

To open a new store, Linton Tire Company plans to invest $250,000 in equipment expected to have a five -year useful life and no salvage value. Linton expects the new store to generate annual cash revenues of $316,000 and to incur annual cash operating expenses of $192,000. Lintons average income tax rate is 35 percent. The company uses straight-line depreciation.

Required

Determine the expected annual net cash inflow / outflow for each of the first four years after Linton opens the new store. (Negative amounts should be indicated by a minus sign.)

	Net cash	Inflow / Outflow
Year 1		Outflow
Year 2
Year 3
Year 4