Question

Assume a corporation has earnings before depreciation and taxes of $100,000, depreciation of $40,000, and that it has a 40 percent tax bracket.
a. Compute its cash flow using the following format.
Earnings before depreciation and taxes _____
Depreciation _____
Earnings before taxes _____
Taxes @ 40% _____
Earnings after taxes _____
Depreciation _____
b. Compute the cash flow for the company if depreciation is only $20,000.
c. How much cash flow is lost due to the reduced depreciation from $40,000 to $20,000?



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  • CreatedOctober 14, 2014
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