Question 4 Assume the following: A firm acquires an asset for $120,000 with a 5 year useful life and no salvage The asset will generate $50,000 of cash flow for all five years The tax rate is 20% The firm will depreciate the asset over four years on a straight-line (SL) basis for tax purposes and over five years on a SL basis for financial reporting purposes. Pretax income in year 1 is: $20,000 $26,000 $5,200