Cost/Purchase Price 50,000.

00
Capital Expenditures/Shipping and Installation 20,000.00
Increase/(Decrease) in Net Working Capital 5,000.00
Proceeds from Sale of Old Asset (if replacement) -
Tax/(Savings) on disposal of old asset -
Initial Cash Outflow 75,000.00

Year 1 Year 2 Year 3 Year 4

Incremental Revenue 110,000.00 110,000.00 110,000.00 110,000.00
Less Incremental Expenses 70,000.00 70,000.00 70,000.00 70,000.00
Operating Cash flow before dep'n. and tax 40,000.00 40,000.00 40,000.00 40,000.00
Less Depreciation Expense 24,000.00 18,000.00 12,000.00 6,000.00
Operating Income/Income bef. Tax 16,000.00 22,000.00 28,000.00 34,000.00
Less Income Tax 4,800.00 6,600.00 8,400.00 10,200.00
Net Income 11,200.00 15,400.00 19,600.00 23,800.00
Add Depreciation Expense 24,000.00 18,000.00 12,000.00 6,000.00
Operating Cash flows after tax 35,200.00 33,400.00 31,600.00 29,800.00

Operating Cash flow before dep'n. but after tax 28,000.00 28,000.00 28,000.00 28,000.00
Add Tax saving on depreciation 7,200.00 5,400.00 3,600.00 1,800.00
Operating Cash flows after tax 35,200.00 33,400.00 31,600.00 29,800.00

Operating Cash flow before dep'n. but after tax (Inc. Rev - Inc Cost or Exp) X (1 - TR)
Tax Savings on Depreciation (Depreciation X TR)

Terminal Cash Flows:

Last period operating cash flows 29,800.00
Salvage value of the New Asset 10,000.00
Tax/Savings on sale of new asset -
Decrease/(Increase) in NWC 5,000.00
Terminal Cash Inflows 44,800.00
Cost 50,000.00 Cost
Shipping and Installation 20,000.00 AD
Increase in NWC 5,000.00 BV
Net proceeds from sale of old (6,000.00) Proceeds
Tax Savings (3,825.00) Loss on Sale
Initial Cash Outflow 65,175.00 Tax Rate
Tax Savings

Year 1 Year 2 Year 3 Year 4 Year 5

OCF after tax but before Dep'n. 7,000.00 7,000.00 7,000.00 7,000.00 7,000.00
Tax saving on Increase in Depreciation 4,875.00 3,675.00 2,475.00 1,275.00 75.00
Operating Cash Flows after Tax 11,875.00 10,675.00 9,475.00 8,275.00 7,075.00

Depreciation of New Machine 20,000.00 16,000.00 12,000.00 8,000.00 4,000.00

Depreciation of Old Machine (30,000 / 8) 3,750.00 3,750.00 3,750.00 3,750.00 3,750.00
Incremental Depreciation 16,250.00 12,250.00 8,250.00 4,250.00 250.00
Tax Rate 30% 30% 30% 30% 30%
Tax Savings 4,875.00 3,675.00 2,475.00 1,275.00 75.00

Increase in Revenue - - - - -
(Increase) /Decrease in Operating Expense 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00
Income bef dep'n. and tax 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00
Less Depreciation (Increase) 16,250.00 12,250.00 8,250.00 4,250.00 250.00
Inc./(Loss) Bef Tax (6,250.00) (2,250.00) 1,750.00 5,750.00 9,750.00
Less Income Tax (1,875.00) (675.00) 525.00 1,725.00 2,925.00
Net Inc./(loss) (4,375.00) (1,575.00) 1,225.00 4,025.00 6,825.00
Add Increase in Depreciation 16,250.00 12,250.00 8,250.00 4,250.00 250.00
Operating Cash Flows after Tax 11,875.00 10,675.00 9,475.00 8,275.00 7,075.00
30,000.00
11,250.00
18,750.00
6,000.00
12,750.00
30%
3,825.00