Santa Cruz Company has a tax rate of 20 percent on taxable income. It is considering a
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Santa Cruz Company has a tax rate of 20 percent on taxable income. It is considering a capital project that will make the following annual contribution to operating income:
1. Determine the net cash Inflows for this project in two different ways. Are net cash flows the same under either approach?
2. What is the impact of income taxes on net cash flows?
Transcribed Image Text:
$ 400,000 (200,000) (140,000) Cash revenues Cash expenses Depreciation Operating income before income taxes Income taxes at 20% Operating income (12,000) S 48,000
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