Year 1 2 3 4 5 6

Cash flow contribution before taxes and depreciation $ 23,000.00 $ 23,000.00 $ 23,000.00 $ 23,000.00 $ 23,000.00 $ 23,000.00
Depreciation (60000/4years) 15,000.00 15,000.00 15,000.00 15,000.00
Earnings before income tax $ 8,000.00 $ 8,000.00 $ 8,000.00 $ 8,000.00 $ 23,000.00 $ 23,000.00
Income Tax (25%) 2,000.00 2,000.00 2,000.00 2,000.00 6,000.00 6,000.00
Earnings after income tax $ 6,000.00 $ 6,000.00 $ 6,000.00 $ 6,000.00 $ 17,000.00 $ 17,000.00
Add back: Depreciation 15,000.00 15,000.00 15,000.00 15,000.00
Cash flow $ 21,000.00 $ 21,000.00 $ 21,000.00 $ 21,000.00 $ 17,000.00 $ 17,000.00

1.

Year 0 1 2 3 4 5
Cost $ 90,000.00
Savings $ 40,000.00 $ 40,000.00
$ 40,000.00 $ 40,000.00 $ 40,000.00
Depreciation (90000/3years) (30,000.00) (30,000.00)
(30,000.00)
Earnings before income tax $ 10,000.00 $ 10,000.00
$ 10,000.00 $ 40,000.00 $ 40,000.00
Income tax (30%) (3,000.00) (3,000.00)
(3,000.00) (12,000.00) (12,000.00)
Earnings after income tax $ 7,000.00 $ 7,000.00
$ 7,000.00 $ 28,000.00 $ 28,000.00
Add back: Depreciation 30,000.00 30,000.0030,000.00
Sale in the 5th year $ 20,000.00
Tax on the 5th sale (20000x30%) $ (6,000.00)
Cash flow $ 37,000.00 $ 37,000.00 $ 37,000.00 $ 28,000.00 $ 42,000.00

2.

Sale of old equipment $ 75,000.00 $ 75,000.00

Book value (35,000.00)
Accounting profit $ 40,000.00
Tax (35%) (14,000.00) (14,000.00)
Cash flow from the sale of old equipment $ 61,000.00

Cost of the new equipment $ 150,000.00

Cash flow from old equipment (61,000.00)
Project's initial outlay $ 89,000.00

3.
Operating Cash Flow
Savings from the outside service $ 150,000.00
Annual truck expenses (80,000.00)
Depreciation (200,000-40,000)/10years (16,000.00)
Operating Income before Income Tax $ 54,000.00
Income Tax ( 40%) (21,600.00)
Operating income after income tax $ 32,400.00
Add back: Depreciation 16,000.00
Operating Cash Flow $ 48,400.00

Cash flow from sale of truck - Year 5

Sale of truck $ 100,000.00

Tax savings 8,000.00
Cash flow $ 108,000.00

Tax savings
Sale value $ 100,000.00
Book Value (120,000.00)
Loss on sale $ (20,000.00)
Tax rate 40%
Tax savings $ (8,000.00)

Total cash flows for year 5

$ 48,400.00
108,000.00
$ 156,400.00