Assume a corporation has earnings before depreciation and taxes of $114,000, dep

Question

Assume a corporation has earnings before depreciation and taxes of $114,000, depreciation of $42,000, and that it has a 35 percent tax bracket.

Compute its cash flow using the following format. (Input all answers as positive values.)

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

How much cash flow is lost due to the reduced depreciation from $42,000 to $16,000?
Cash flow lost

Earnings before depreciation and taxes $   Depreciation   Earnings before taxes $   Taxes   Earnings after taxes $   Depreciation   Cash flow $

Explanation / Answer

a) Compute its cash flow using the following format. (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 the reduced depreciation from $42,000 to $16,000?

Cash flow lost = 88800 - 79700

Cash flow lost = $ 9100

Earnings before depreciation and taxes 114000   Depreciation 42000   Earnings before taxes 72000   Taxes 25200   Earnings after taxes 46800   Depreciation 42000   Cash flow 88800

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