$72,800 $73,600 $63,800 $69,000 2.50 0.47 0.09 1.27 The Wet Corp. has an investm

Question

$72,800

$73,600

$63,800

$69,000

2.50

0.47

0.09

1.27

The Wet Corp. has an investment project that will reduce expenses by $30,000 per year for 3 years. The project's cost is $20,000. If the asset is part of the 3-year MACRS category (33.33% first year depreciation) and the company's tax rate is 27%, what is the cash flow from the project in year 1? (Do not round intermediate calculations. Round your answer to the nearest dollar amount.)

$25,160

$23,150

$23,700

$24,480

Assume a corporation has earnings before depreciation and taxes of $90,000, depreciation of $20,000, and that it has a 30 percent tax bracket. What are the after-tax cash flows for the company?

Explanation / Answer

Earnings before depreciation and taxes $ 90,000 Less: Depreciation $ 20,000 Profit before tax $ 70,000 Less: Tax $ 21,000 Profit after tax $ 49,000 Add: Depreciation $ 20,000 After tax cash flows $ 69,000

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