11 A new plastic molding machine was purchased at 250000 In

11. A new plastic molding machine was purchased at $250,000. In a tabular form, show for 6 years of ownership, using an effective tax rate of 39% and the CFBT and CFAT the estimated cash flow amounts shown below. Salvage is expected to be zero. MACR 5 years recovery period is used for depreciation. Gross Income, SEx Year Operating 90,000 100,000 80,000 80,000 80,000 60,000 -20,000 20,000 -24,000 28,000 -32,000 36,000

Solution

Cash flow after tax is the sum of net income after tax and depreciation expense as depreciation does not involve any cash flow and is only an adjusting entry.

Year	CFBT	CFAT
1	70000	62200
2	80000	80000
3	56000	52880
4	52000	42952
5	48000	40512
6	24000	20256