Telstar Communications is going to purchase an asset for $320,000 that will produce $150,000 per year for the next four years in earnings before depreciation and taxes. The asset will be depreciated using the three-year MACRS depreciation schedule in Table 12?12. (This represents four years of depreciation based on the half-year convention.) The firm is in a 30 percent tax bracket.

Fill in the schedule below for the next four years.

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Earnings before depreciation and taxes Depreciation Earnings before taxes Taxes Earnings after taxes Depreciation Cash flow Year 1 Year 2 Year 3 Year 4 Earnings before depreciation and taxes Depreciation Earnings before taxes Taxes Earnings after taxes Depreciation Cash flow Year 1 Year 2 Year 3 Year 4

Answer rating: 100% (QA)

Calculation Depreciation for Year 1 320000 3333 1066... View the full answer