Problem $9-04$

If a corporation earns $$330,000$ and the payout ratio $($proportion distributed$)$ is $55$ percent, what is the change in retained earnings? Round your answer to the nearest dollar.

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A firm has earnings of $$23,000$ before interest, depreciation, and taxes. A new piece of equipment is installed at a cost of $$10,000.$ The equipment will be depreciated over five years, and the firm pays $25$ percent of its.earnings in taxes. What are the earnings and cash flows for the firm in years $2$ and $5,$ using the two methods of depreciation? Use Exhibit $9\mathrm{.}4$ to answer the questions. Round your answers to the nearest dollar.

Modified Accelerated

Earnings before depreciation and taxes

Depreciation expense

Earnings after depreciation

Taxes $(25\%$ tax rate$)$

Net earnings

Cash flow

Straight$-$line

Year $2$

Cost Recovery

Year $2$

Year $5$

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