Complete an Income Statement and Cash Flow Analysis using th

Complete an Income Statement and Cash Flow Analysis using the following data. Sales $400,000 Annually Operating Expense = $175,000 Annually Maintenance Expense = $50,000 Annually Equipment purchased = $460*000 and depreciated as a 3-year MACRS asset. No salvage value and no proceeds for the asset at the end of the project. The marginal income tax rate is 38%.

Solution

The income and cash flow statement is calculated as follows:

Year	0	1	2	3	4
Initial investment	-160,000
Sales		400000.00	400000.00	400000.00	400000.00
Operating expenses		175000.00	175000.00	175000.00	175000.00
Maintenance expense		50000.00	50000.00	50000.00	50000.00
Depreciation		53328.00	71120.00	23696.00	11856.00
Profit before tax		121672.00	103880.00	151304.00	163144.00
Tax at 38%		46235.36	39474.40	57495.52	61994.72
Net Income		75,436.64	64,405.60	93,808.48	101,149.28
Cash flow Statement
Net Income		75436.64	64405.60	93808.48	101149.28
Add dack depreciation		53328.00	71120.00	23696.00	11856.00
Net Cash flow	-160,000	128,764.64	135,525.60	117,504.48	113,005.28