Homework SourseAssume a corporation has earnings before depreciation and ta
Assume a corporation has earnings before depreciation and taxes of $125,000, depreciation of $40,000, and that it has a 30 percent tax bracket.
a. Compute its cash flow using the following format. (Input all answers as positive values.)
25,487 answers
b. How much would cash flow be if there were only $15,000 in depreciation? All other factors are the same. c. How much cash flow is lost due to the reduced depreciation from $40,000 to $15,000?
| PArticulars | Amount($) |
| earnings before depreciation and taxes | |
| Less:depreciation | |
| Earnings before tax | |
| Less:tax@30% | |
| Net income |
Solution
a.
Hence cash flow=Net income+Depreciation
=(59500+40000)=$99500
b.
Hence cash flow=Net income+Depreciation
=(77000+15000)=$92000
c.Hence cash flow lost=(99500-92000)=$7500
| Earnings before depreciation and taxes | 125000 |
| Less:depreciation | (40000) |
| Earnings before taxes | $85000 |
| Less:tax@30% | $25500 |
| Net income | $59500 |
