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A new project has an initial cost of $480,000 with an expected life of 8 years....

A new project has an initial cost of $480,000 with an expected life of 8 years. The project is expected to have earnings before depreciation and taxes of $125,000 per year. If the projected is being depreciated over a 3-year term and the firm's tax rate is 40%, calculate the cashflows of the project over its estimated life.

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Answer #1
Years   1 2 3 4 5 6 7 8
Earnings before depreciation and taxes 125000 125000 125000 125000 125000 125000 125000 125000
(-) Depreciation [ 480000/3 ] 160000 160000 160000 0 0 0 0 0
Earnings before tax -35000 -35000 -35000 125000 125000 125000 125000 125000
(-) Tax @ 40% -14000 -14000 -14000 50000 50000 50000 50000 50000
Earnings after tax -21000 -21000 -21000 75000 75000 75000 75000 75000
(+) Depreciation 160000 160000 160000 0 0 0 0 0
Cashflows 139000 139000 139000 75000 75000 75000 75000 75000
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