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Assume a corporation has earnings before depreciation and taxes of $104,000, depreciation of $42,000, and that...

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Finance

Assume a corporation has earnings before depreciation and taxesof $104,000, depreciation of $42,000, and that it has a 30 percenttax bracket.

a. Compute its cash flow using the followingformat. (Input all answers as positive values.)
  

b. How much would cash flow be if there were only$16,000 in depreciation? All other factors are the same.
  

c. How much cash flow is lost due to thereduced depreciation from $42,000 to $16,000?
  

PLEASE HELP!!!

Answer & Explanation Solved by verified expert
4.3 Ratings (923 Votes)

(a)  
Earnings before

Depreciation and taxes   104000
less: Depreciation   42000
_______________________________________  
Earnings before taxes   62000
less: Taxes (30%)   18600
_______________________________________  
Net income   43400
Add: Depreciation   42000
_______________________________________  
Cash flow   $85,400.00

______________________________________


Cash flow is   $85,400.00

B.

Earnings before Depreciation and taxes   104000
less: Depreciation   16000
_______________________________________  
Earnings before taxes   88000
less: Taxes (30%)   26400
_______________________________________  
Net income   61600
Add: Depreciation   16000
_______________________________________  
Cash flow   $77,600.00
_______________________________________  
Cash flow is   $77,600.00

C.
Cash flow reduced by $85400-77600=   $7,800.00
  

Please thumbs up
  

  
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