You are interested in purchasing a small shop. The sellers of the shop shared their shops most recent income statement with you. It is shown below:

The negative Income Tax Expense surprised you, until you remembered that it could be carried forward to offset positive Income Tax Expense in the future. If you were to purchase the shop, you think you could make Sales Revenue increase 10% per year. You also think COGS will remain at a constant percentage of sales, and that you could control Operating Expenses so they would remain at $200,000 per year. Assume Interest Expense is $0. What do you expect the after-tax operating cash flows to be for each of the coming five years? (Hint: The future cash flows are not an annuity. This problem is best done in Excel.)

FY 2016 $ 780,000 600,000 Sales COGS Gross Profit Operating Expenses* Operating Income/(Loss) Interest Expense Earnings B4 Tax (EBT) Income Taxes (@ 35%) (7.000) Net Income/(Loss) Includes straight-line depreciation expense of s 180,0 200,000 - (20,000) 0 000) (13,000) $20,000