Telstar

Telstar Communications is going to purchase an asset for $620,000 that will produce $300,000 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 12-12. (This represents four years of depreciation based on the half-year convention.) The firm is in a 30 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 floww