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jasenka [17]
3 years ago
9

Assume a corporation has earnings before depreciation and taxes of $123,000, depreciation of $41,000, and that it has a 35 perce

nt tax bracket. a. Compute its cash flow using the following format. (Input all answers as positive values.) b. How much would cash flow be if there were only $21,000 in depreciation
Business
1 answer:
Maslowich3 years ago
3 0

Answer:

a.                     Computation of cash flow

Earnings before depreciation and taxes    $123,000

Less: Depreciation                                        <u> $41,000 </u>

Earnings before taxes                                   $82,000

Less: Taxes ($82,000*35%)                          <u>$28,700</u>

Earnings after taxes                                       $53,300

Add: Depreciation                                          <u>$41,000</u>

Cash Flow                                                      <u>$94,300</u>

b.  If Depreciation = 21,000  

                     Computation of cash flow

Earnings before depreciation and taxes  $123,000

Less: Depreciation                                          <u>$21,000 </u>

Earnings before taxes                                    $102,000

Less: Taxes($102,000*35%)                           <u>$35,700 </u>

Earnings after taxes                                        $66,300

Add: Depreciation                                           <u>$21,000</u>

Cash Flow                                                        <u>$87,300</u>

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