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Table 1 Year MACRS Depreciation Book Value 1 33% 221,100 448,900 2 45 301,500 147,400 3 15 100,500 46,900 4 7 46,900 0 100 670,000

Table 1
Year MACRS Depreciation Book Value
1 33% 221,100 448,900
2 45 301,500 147,400
3 15 100,500 46,900
4 7 46,900 0
100 670,000

See years 1 and 4 as examples in Table 1. In year 1, 3 X 425,000 = 1,275,000 637,500 221,100 20,000 = 396,400 158,560 = 237,840 + 221,100 = 458,940 = project NCF = after tax, end-of-year cash inflows, CFt. In year 4, 3 X 425,000 = 1,275,000 637,500 46,900 20,000 = 570,600 228,240 = 342,360 + 46,900 = 389,260.

Should the project be undertaken? Fill in X's

Y 0 Y 1 Y 2 Y 3 Y 4

Unit Price

$3 X X $3
Unit Sales 425,000 x x 425,000
Revenues 1,275,000 X X 1,275,000
Operating Costs 637,500 X X 637,500
Depreciation 221,100 X X 46,900
Other Project Effects 20,000 X X 20,000
Before tax income 396,400 X X 570,600
Taxes 158,560 X X 228,240
Net Income 237,840 X X 342,360
Plus Depreciation 221,100 X X 46,900
Net Op Cash Flow 458,940 X X 389,260
Salvage Value 100,000
SV Tax X
Recovery of NWC X
Termination CF X
Project NCF X X X X X

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