Popsico is considering the purchase of a device that will speed up their soft drink

production. The device has an ADR class life of $7$ years. The device will cost $$240,000$ and

produce annual benefits of $$85,000.$ The equipment will be sold $4$ years later for $30,000,$ The

company is in the $34\%$ tax bracket. Use MACRS depreciation.

Year BTCF ATCF

$0-$$$240,000$

$1$ $$85,000$

$2$ $$85,000$

$3$ $$85,000$

$4$ $$115,000$

a$.$ Fill in the table to determine the AFTER TAX CASH FLOW $($ATCF$)$ for the project.

Determine any ordinary gains or losses incurred when BP sold the equipment.

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b$.$ Inflation rate is $4\%$ per year, determine the Real and ACTUAL DOLLARS BTCF$.$

Year Real Dollars BTCF Actual Dollars BTCF

$0$

$1$

$2$

$3$

$4$