1 A new plastic molding machine was purchased at S250000 In

1. A new plastic molding machine was purchased at S250,000. In a tabular fom, show the CFBT and CFAT for 6 years of ownership, using an effective tax rate of 39% and the estimated cash flow amounts shown below. Salvage is expected to be zero. MACR 5 years recovery period is used for depreciation Year Gross Income, S 90,000 100,000 80,000 80,000 80,000 60,000 Operating Expenses, S -20,000 20,000 24,000 28,000 32,000 -36,000

Solution

CFBT =( Revenues - expenses - depreciation)

CFAT = ( Revenues - expenses - depreication) ( 1 - tax rate) + depreciation

Year	Gross income	Operating expenses	Depreciation rate	Depreciation per year	CFBT	CFAT
1	90,000	-20,000	20%	50000	20,000	62200
2	100,000	-20,000	32%	80000	0	80000
3	80,000	-20,000	19.20%	48000	12,000	55320
4	80,000	-20,000	11.52%	28800	31,200	47832
5	80,000	-20,000	11.52%	28800	31,200	47832
6	60,000	-20,000	5.76%	14400	25,600	30016