Determine the expected annual net cash inflow

Reference no: EM131933401

Problem

The outflow is not $290,000, -$290,000, $324,000, -$324,000, or $110,000 like other example answers given on Chegg study. An explanation would be appreciated so I can learn it, thank you!

To open a new store, Linton Tire Company plans to invest $290,000 in equipment expected to have a five -year useful life and no salvage value. Linton expects the new store to generate annual cash revenues of $324,000 and to incur annual cash operating expenses of $186,000. Linton's average income tax rate is 35 percent. The company uses straight-line depreciation.

Required

Determine the expected annual net cash inflow / outflow for each of the first four years after Linton opens the new store.

Reference no: EM131933401

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