Find the after-tax cash flow for each year

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Reference no: EM131085609

A special handling device for the manufacture of food is placed in service. It costs $20,000 and has a salvage value of $2,000 after a useful life of 5 years. The device generates a savings of $14,000 per year. Corporate income taxes are 40 percent. Find the after-tax cash flow for each year if:

A) Depreciation allowances are $9,999, $13,335, $4,443, $2,223, and $0 for years 1-5 (MACRS-GDS 3-year property class).

B) Depreciation allowances are $7,500 for each of years 1-4 and $0 in year 5 (SLN depreciation only of the first 4 years).

NOTE: Assume the asset is not sold at the end of it’s useful life. In other words, you do not have to consider, its salvage value as a cash flow in year 5.

Reference no: EM131085609

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