1)
Earnings before depreciation and taxes = 100,000
Depreciation = ( 40,000)
Earnings before taxes = 60,000
Taxes = 0.24 * 60,000 = (14,400)
Earnings after taxes = 45,600
Depreciation = 40,000
Cash flow = 85,600
2)
If dep was only 20,000:
Earnings before depreciation and taxes = 100,000
Depreciation = ( 20,000)
Earnings before taxes = 80,000
Taxes = 0.24 * 80,000 = (19,200)
Earnings after taxes = 60,800
Depreciation = 20,000
Cash flow = 80,800
c)
Cash flow lost = 85,600 - 80,800
Cash flow lost = 4,800
Assume a corporation has earnings before depreciation and taxes of $100,000, depreciation of $40,000, and a...
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