Assume a corporation has earnings before depreciation and taxes of $100,000, depreciation of $40,000, and that it

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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?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Related Book For  answer-question

Foundations of Financial Management

ISBN: 978-1259194078

15th edition

Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen

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