Cornerstone Company had revenues of 275000 and expenses of 1

Cornerstone Company had revenues of $275,000 and expenses of $100,000 last year. Cornerstone was taxed at a rate of 40%. If the company

Solution

tax shield = $25,000*40% = $10,000

Income before taxes = $200,000

Net income = $120,000

Add depreciation tax shield = $10,000

Cash flows from operations = $120,000+$10,000 = $130,000

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