To open a new store, Linton Tire Company plans to invest $212,000 in equipment e
ID: 2563302 • Letter: T
Question
To open a new store, Linton Tire Company plans to invest $212,000 in equipment expected to have a four year useful life and no salvage value. Linton expects the new store to generate annual cash revenues of $320,000 and to incur annual cash operating expenses of $193,000. Linton's average income tax rate is 35 Required Determine the expected annual net cash inflow / outflow from operations for each of the first four years after Linton opens the new store. (Negative amounts should be indicated by a minus sign.) Net cash Inflow/ Outflow Year 1 Year 2 Year 3 Year 4Explanation / Answer
Dear Student Thank you for using Chegg Please find below the answer and please give thumbs up Statementshowing Computations Paticulars Year 1 Year 2 Year 3 Year 4 Investment a (212,000.00) Cash revenues 320,000.00 320,000.00 320,000.00 320,000.00 Cash operating expenses (193,000.00) (193,000.00) (193,000.00) (193,000.00) Depreciation = 212000/4 (53,000.00) (53,000.00) (53,000.00) (53,000.00) Income before tax 74,000.00 74,000.00 74,000.00 74,000.00 Tax at 35% (25,900.00) (25,900.00) (25,900.00) (25,900.00) Income after tax 48,100.00 48,100.00 48,100.00 48,100.00 Add Depreciation 53,000.00 53,000.00 53,000.00 53,000.00 Cash flows after tax b 101,100.00 101,100.00 101,100.00 101,100.00 Net Cash =a +b (110,900.00) 101,100.00 101,100.00 101,100.00 Inflow/Outflow Outflow Inflow Inflow Inflow
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