Sports biz a profitable company built and equipped a

Reference no: EM13588165

Sports Biz, a profitable company, built and equipped a $2,000,000 plant brought into operation early in year 1. Earnings of the company is projected at: $1,500,000 in Year I; $2,000,000 in Year 2; $2,500,000 in Year 3; $3,000,000 in Year 4; and $3,500,000 in Year 5. The company can use straight line, double declining balance, or sum of the years' digits depreciation for the new plant. Assume the plant's useful life is 10 years (with no salvage value) and an income tax rate of 50%.

Compute the separate effect that each of these three models of depreciation would have on:

Depreciation
Income taxes
Net income
Cash flow

Reference no: EM13588165

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