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Answer:
The correct answer is D.
Explanation:
Giving the following information:
Earnings before interest and taxes (EBIT) = $700 million.
Earnings before interest, taxes, depreciation and amortization (EBITDA) = $850 million.
Interest expense = $200 million.
The corporate tax rate is 40 percent.
First, we need to determine the depreciation expense.
Depreciation= EBITDA - EBIT= 850 - 700= 150million
Net cash flow= EBIT - Interest - Tax + Depreciation
EBIT= 700
Insterest= 200 million (-)
EBT= 500
Tax= 500*0.40= 200 (-)
Depreciation= 150 (+)
Net cash flow= 450 million
Answer:
Year 2= $3,333.33
Explanation:
Giving the following information:
A company purchased a computer system for $24,000. The estimated useful life is 6 years, and the estimated residual value is $9,000.
To calculate the depreciation expense for the second year, we need to use the following formula for year 1 and 2:
Annual depreciation= 2*[(book value)/estimated life (years)]
Year 1= 2*[(24,000 - 9,000)/6]= 5,000
Year 2= 2*[(15,000 - 5,000)/6]= 3,333.33