Steadman Company is considering an investment in a new machine for an independent five-year project. The machines cost is $500,000 with no salvage value at the end of five years. Net cash inflows from the project are expected to be $140,000 annually. Steadman would depreciate the machine using the NACRS schedule, and the machine qualifies as a five-year asset. Steadman uses a discount rate of 8%, and its tax rate is 30%.

Determine the after-tax income and after-tax cash flows from the investment. Refer to Exhibit 12.4 for the five year MACRS depreciation schedule. Please write out all calculations.

EXHIBIT 12.4 MACRS Depreciation Rates Year 3-year 5-year 7-year 10-year 15-year 20-year 1 33.33 20.00 14.29 10.00 5.00 3.75 2 44.45 32.00 24.49 18.00 9.50 7.22 3 14.81 19.20 17.49 14.40 8.55 6.68 4 7.41 11.52* 12.49 11.52 7.70 6.18 5 11.52 8.93* 9.22 6.93 5.71 6 5.76 8.92 7-37 6.23 5.28 7 8.92 6.55* 5.90* 4.89 8 4.47 6.55 5.90 4.52 9 6.56 5.91 4.46* 10 6.55 5.90 4.46 11 3.28 etc. etc