Chapter 16, Problem 8E

Exercise 10-8A Determining the cash flow annuity with income tax considerations

To open a new store, Enid Tire Company plans to invest $320,000 in equipment expected to have a four-year useful life and no salvage value. Enid expects the new store to generate annual cash revenues of $400,000 and to incur annual cash operating expenses of $240,000. Enid’s average income tax rate is 30 percent. The company uses straight-line depreciation.

Required

Determine the expected annual net cash inflow from operations for each of the first four years after Enid opens the new store.