Question

Assume a project has earnings before depreciation and taxes of $15,000, depreciation of $25,000, and that the firm has a 30% tax bracket. What are the after-tax cash flows for the project

Answer 1

Answer: $12,000

Explanation:

The following information can be gotten from the question:

Earnings before depreciation and taxes = $15,000

Less: depreciation = $25,000

The earnings before tax = -$10,000

Less: taxes at 30% = -$3,000

Earnings after tax = -$13,000

Add: depreciation = $25,000

Cash flow = $25,000 - $13,000

= $12,000