You consider purchasing a new computing system, including networking, for your sales force for $100,000. The system has a 6-year useful life and no salvage value. Your sales force is expected to generate an additional $35,000 of net income before taxes and depreciation each year by using this upgraded system. The combined federal and state income tax rate = 35%. Annual inflation = 4%.

a. Fill in the following table assuming MACRS depreciation rates

Inflation Pretax Taxable Tax After tax Real after Year Depreciation adjustment income income owed income tax income factor 0 -$100,000 1 $35,000 2 $35,000 3 $35,000 4 $35,000 5 $35,000 6 $35,000