Assume a corporation has earnings before depreciation and taxes of $102,000, depreciation of $40,000, and that it has a 35 percent tax bracket.

Assume a corporation has earnings before depreciation and taxes of $102,000, depreciation of $40,000, and that it has a 35 percent tax bracket.

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

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

b. How much would cash flow be if there were only $12,000 in depreciation? All other factors are the same.

Cash flow $

c. How much cash flow is lost due to the reduced depreciation from $40,000 to $12,000?

 

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