Team members involved in the target costing process should consider the current and future effects of their proposed solutions to arrive at the proposed target cost. Assume in the Boards & More example illustrated in Exhibit 198 that one proposed solution is to acquire new heating and drying equipment for the new paperboard mix. Assume the new equipment has a purchase price of $500,000 and is expected to increase the annual depreciation expense by $50,000 per year for tax reporting purposes.

a. How will the acquisition of this equipment be reported in the companys statement of cash flows in the current year?

b. How will the acquisition of this equipment impact after-tax cash flow in future years?