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Sports Biz, a profitable company, built and equipped a $2,000,000 plant brought into operation early in Year 1. Earnings of the company (before depreciation on
Sports Biz, a profitable company, built and equipped a $2,000,000 plant brought into operation early in Year 1. Earnings of the company (before depreciation on the new plant and before income taxes) is projected at: $1,500,000 in Year 1; $2,000,000 in Year 2; $2,500,000 in Year 3; $3,000,000 in Year 4; and $3,500,000 in Year 5. The company can use straight-line, double declining balance, or sum-of-the-years"-digits depreciation for the new plant. Assume the plant"s useful life is 10 years (with no salvage value) and an income tax rate of 50%.
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