In year 1, Firm A paid $50,000 cash to purchase a tangible business asset. In year 1 and year 2, it deducted $3,140 and $7,200 depreciation with respect to the asset. Firm A’s marginal tax rate in both years was 21 percent.


Required:

Compute Firm A’s net cash flow attributable to the asset purchase in each year. Compute Firm A’s adjusted basis in the asset at the end of each year.