Assume a corporation has earnings before depreciation and taxes of $90,000, depreciation of $35,000, and that...

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Finance

Assume a corporation has earnings before depreciation and taxesof $90,000, depreciation of $35,000, and that it has a 40% combinedtax bracket. What are the after-tax cash flows for the company?
Multiple Choice
$68,000
$62,800
$72,600
$71,800

Answer & Explanation Solved by verified expert

4.1 Ratings (597 Votes)

The after tax cash flow is calculated using two steps as below:

Earnings after Tax = Earnings before depreciation and taxes – Depreciation – Tax

= $90,000 - $35,000 – $22,000*

= $33,0000

*(40%*55,000)

After tax cash flow= Earnings after Tax + Depreciation

= $33,000 + $35,000

= $68,000.

Depreciation is added back here since it is a non-cash expense.

Hence, the answer is option a.

In case of any query, kindly comment on the solution.

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Assume a corporation has earnings before depreciation and taxes of $90,000, depreciation of $35,000, and that...

Free

60.1K

Verified Solution

Question

Finance

Assume a corporation has earnings before depreciation and taxesof $90,000, depreciation of $35,000, and that it has a 40% combinedtax bracket. What are the after-tax cash flows for the company?
Multiple Choice
$68,000
$62,800
$72,600
$71,800

Answer & Explanation Solved by verified expert

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Assume a corporation has earnings before depreciation and taxes of $90,000, depreciation of $35,000, and that...

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Verified Solution

Question

Finance

Assume a corporation has earnings before depreciation and taxesof $90,000, depreciation of $35,000, and that it has a 40% combinedtax bracket. What are the after-tax cash flows for the company?Multiple Choice$68,000$62,800$72,600$71,800

Answer & Explanation Solved by verified expert

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Transcribed Image Text

Other questions asked by students

Assume a corporation has earnings before depreciation and taxesof $90,000, depreciation of $35,000, and that it has a 40% combinedtax bracket. What are the after-tax cash flows for the company?
Multiple Choice
$68,000
$62,800
$72,600
$71,800