Four years ago, ABB purchased an asset for $300,000 with an estimated salvage of $60,000. Depreciation was $60,000 per year. The following annual gross income and expenses were recorded. The asset was sold for $60,000 after 4 years.

Required

(a) Tabulate the cash flows by hand after applying an effective tax rate of 32%.

(b) Continue with the table above and calculate the net income (NI) estimates.

Year of ownership              1               2                3                4

Gross income,           $80,000        150,000        120,000      100,000

Expenses,                $  -20,000        -40,000           -30,000      -50,000

Answer rating: 100% (QA)

a Cash flows after applying an effective tax rate of 32 Year 1 Taxable income Gross income Expenses ... View the full answer