Income statement tax rate Revenues Expenses 0&M Labor Material Overhead Depreciation Debt Interest Taxable income Income taxes Net income Cash Flow Statement Operating activities Net income Depreciation Investment activities Investment Salvage Gains tax Working capital Financing activities Borrowed funds Principal repayment Net Cash Flow Constant dollar NM (11%} = NPW(Constant SI = IHR = Investment $150,000.00 Borrowed funds $120,000.00 Annual O&M (actual $) $ 15,000.00 S (constant $ 30,000.00 REVENUES (ACTUAL DOLLARS) MARR/market interest rate 1.00% YEAR YEAR 2 YEAR 3 YEAR 4 YEAR 5 N= 5 50,000 52,000 54,000 56,000 58,000 inflation free i' = general inflation rate f = 4.00% Annual Pmt = Borrowing interest rate 10.00% n In Pn Bn 2 4 Depreciation n % Dep 2 3 Working Capital Bn WC 0 2 3 A cost dep Book S Delta Gain/Loss