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Straight-line depreciation is an accounting method used to allocate the cost of a tangible asset over its useful life in a linear fashion. This method is both simple to calculate and apply, making it a popular choice for businesses. When Etonic Inc. purchases an asset for \(\mathbf{\$ 0 5 , 0 0 0}\), it decides the asset will be fully depreciated over a period of five years.

Under the straight-line method, the formula is as follows: \[Depreciation\, Expense = \frac{Initial\,Value- Salvage\,Value}{Life}\] Since the salvage value is considered to be \(\$0\) after five years, the annual depreciation expense is calculated by simply dividing the initial value by the asset's lifespan. For Etonic Inc., the annual depreciation expense comes out to \(\$10,000\) per year. This consistent amount is subtracted each year from the revenues to help calculate the taxable income.

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. In a practical sense, it means that the money you have today will buy less tomorrow. For businesses, inflation impacts both revenues and expenses, and when projecting cash flows, this impact must be taken into consideration.

To adjust for inflation in cash flow calculations like those for Etonic Inc., nominal terms must be used. Nominal terms account for the change in money value due to inflation. The formulas to calculate the nominal annual cash revenues and expenses are: \[Revenues_{Year\,n} = Revenues_{Year\,1} \times (1 + Inflation\,Rate)^{n-1}\] \[Expenses_{Year\,n}=(Expenses_{Year\,1}+Depreciation\,Expense)\times (1 + Inflation\,Rate)^{n-1}\] As revenues and expenses are projected to increase by the inflation rate (3% in this case), every subsequent year's nominal cash flows must be adjusted to reflect the true expected amount, ensuring the accuracy of the cash flow analysis.

After-tax cash flow is the net cash flow available to a business after it has paid all its taxes. This figure is crucial for understanding the true profitability of a project or investment. It is the actual cash that the company can use for various purposes, such as reinvestment, dividend distribution, or debt repayment.

For Etonic Inc., after-tax cash flow calculation incorporates the corporate tax rate of 34 percent and is given by the formula: \[After\,-\,tax\,Cash\,Flow_{Year\,n} = Nominal\,Cash\,Flow\,Before\,Tax_{Year\,n} \times (1 - Tax\,Rate)\] Importantly, tax implications may vastly change the desirability of an investment when compared to pre-tax evaluations. After arriving at the nominal cash flow before tax, the tax rate is applied, reducing the cash flow available and providing a clear picture of the after-tax benefits of the project for each year.