Given Information:

Time span: 10 years

Profits: $3500 annually

Expenses: $3140 annually + $1500 for equipment with life of 10 years and salvage value of $1000. The equipment depreciates with the straight line method, half life convention for 39 years (1/39) to depreciate the equipment.

Loans: $1000 with 6% interest, to be paid over 10 years. The interest on the loan is tax deductible.

Tax income rate: 27.98%

Assume MARR = 10%

Inflation rate = 1.4%

Determine the following:

1. The taxable income

2. Income taxes

3. Tax deductions

4. Total net income.

5. (Extra Credit) Prepare a cash flow statement