wondered whether the bank would extend financing. For her estimates, Ansari decided she would calculate interest, estimated at an annual rate of eight per cent, based on the opening outstanding balance of the loan. All funds would be borrowed at the beginning of the year and interest payments would be made on a monthly basis. She would pay off as much of the loan as possible only at year-end.

Harshini Ansari thought, after projecting these statements, that she could analyze the results, assess the risk of the franchise by looking at her margin of safety and return on investment, and make a decision.

EXHIBIT 1: FIXED ASSET DEPRECIATION SCHEDULE

Sum of Years Digits

Total Depreciation for the Year

Well

Year Investment Tax Credit

Double Declining Balance

1

$ 39,000

$ 100,286

$ 139,2864

Book Value at Year-end

$ 250,714

2

$ 71,633

$ 71,633 $ 59,694

$ 179,081

3

$ 59,694

$ 119,387

4

5

6

7

$ 47,755

$ 47,755

$ 71,632

$ 35,816

$ 35,816

$ 35,816

$ 23,877

$ 11,939

$ 23,877

$ 11,939

$ 11,939

$

0