To open a new store, Ross Tire Company plans to invest $640,000 in equipment expected to have a four-year useful life and no salvage value. Ross expects the new store to generate annual cash revenues of $840,000 and to incur annual cash operating expenses of $520,000. Ross' average income tax rate is 30 percent. The company uses straight-line depreciation.
Determine the expected annual net cash inflow from operations for each of the first four years after Ross opens the new store.© BrainMass Inc. brainmass.com August 20, 2018, 10:12 am ad1c9bdddf
Please refer attached file for better clarity of table in MS Excel.
Depreciation=(Plant Cost-Salvage)/Useful life=$160,000
Tax liability=(Operating Revenue-Operating expense-Depreciation)*Tax ...
Solution depicts the steps to estimate the annual net cash flow in the given case.