Telstar Communications is going to purchase an asset for $800,000 that will produce $390,000 per year for the next four years in earnings before depreciation and taxes. The asset will be depreciated using the three-year MACRS depreciation schedule in Table 1212. (This represents four years of depreciation based on the half-year convention.) The firm is in a 25 percent tax bracket.

Fill in the schedule below for the next four years.

	Year 1	Year 2	Year 3	Year 4
Earnings before depreciation and taxes
Depreciation
Earnings before taxes
Taxes
Earnings after taxes
Depreciation
Cash flow

Table 12-12 Depreciation percentages (expressed in decimals) Depreciation Year 3-Year 5-Year 7-Year 10-Year 15-Year 20-Year MACRS MACRS MACRS MACRS MACRS MACRS 0.333 0.200 0.143 0.100 0.050 0.038 0.445 0.320 0.245 0.180 0.095 0.072 0.148 0.192 0.175 0.144 0.086 0.067 0.074 0.115 0.125 0.115 0.077 0.062 0.115 0.089 0.092 0.069 0.057 0.058 0.089 0.074 0.062 0.053 0.089 0.066 0.059 0.045 0.045 0.066 0.059 0.045 0.065 0.059 0.045 0.065 0.059 0.045 0.033 0.059 0.045 0.059 0.045 0.059 0.045 0.059 0.045 0.059 0.045 0.030 0.045 0.045 0.045 0.045 0.045 0.017 1.000 1.000 1.000 1.000 1.000 1.000