Question

An investment project is expected to generate earnings before taxes (EBT) of $60,000 per year. Annual depreciation from the project is $30,000 and the firm’s tax rate is 40 percent. Determine the project’s annual net cash flows.

Answer 1

Answer:

Net cash flow= $66,000

Explanation:

Giving the following information:

An investment project is expected to generate earnings before taxes (EBT) of $60,000 per year. Annual depreciation from the project is $30,000 and the firm’s tax rate is 40 percent.

Net cash flow= EBT - Tax + Depreciation

Net cash flow= 60,000 - (60,000*0.4) + 30,000= $66,000