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

Assume a corporation has earnings before depreciation and taxes of $90,000, depreciation of $35,000, and that it has a 40% combined tax bracket. What are the after-tax cash flows for the company?

Multiple Choice

$68,000
$62,800
$72,600
$71,800

Expert Solution

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.

jeff jeffy answered 5 months ago

Assume a corporation has earnings before depreciation and taxes of $104,000, depreciation of $42,000, and that...

Assume a corporation has earnings before depreciation and taxes of $104,000, depreciation of $42,000, and that it has a 30 percent tax bracket. 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? PLEASE HELP!!!

Assume a firm has earnings before depreciation and taxes of $520,000 and no depreciation. It is...

Assume a firm has earnings before depreciation and taxes of $520,000 and no depreciation. It is in a 35 percent tax bracket. a. Compute its cash flow. b. Assume it has $520,000 in depreciation. Recompute its cash flow. c. How large a cash flow benefit did the depreciation provide?

Earnings before depreciation, interest, and taxes $1,600,000 Depreciation expense

Earnings before depreciation, interest, and taxes $1,600,000 Depreciation expense $100,000 Tax rate 40% Interest expense $10,000 Common dividends paid $200,000 Number of shares of common stock outstanding $500,000 a. 1.79 b. 1.39 c. 3.20 d. 1.20

A firm has S600,000 earnings before depreciation, interest, taxes. The firm has a depreciation expense of...

A firm has S600,000 earnings before depreciation, interest, taxes. The firm has a depreciation expense of $100,000, and a tax rate of 35%? What is net cash flow from operations?

This year, FCF Inc. has earnings before interest and taxes of $9,420,000, depreciation expenses of $1,400,000,...

This year, FCF Inc. has earnings before interest and taxes of $9,420,000, depreciation expenses of $1,400,000, capital expenditures of $1,500,000, and has increased its net working capital by $475,000. If its tax rate is 38%, what is its free cash flow? Round to to 2 decimals

Hannaford Enterprises reported earnings before interest, taxes, depreciation and amortization (EBITDA) of $ 500 million in...

Hannaford Enterprises reported earnings before interest, taxes, depreciation and amortization (EBITDA) of $ 500 million in 2017. The firm had depreciation of $80 million and reported capital expenditures of $ 120 million. The book value of the invested capital was $2,000 million. The firm’s total working capital increased from $80 million to $180 million, but half of this increase was due to an increase in the cash balance; the firm has no short-term debt. The firm has a tax rate...

Michaels Corporation expects earnings before interest and taxes to be $ 53,000 for this period. Assuming...

Michaels Corporation expects earnings before interest and taxes to be $ 53,000 for this period. Assuming an ordinary tax rate of 40 %, compute the firm's earnings after taxes and earnings available for common stockholders (earnings after taxes and preferred stock dividends, if any) under the following conditions: a. The firm pays $ 11,900 in interest. b. The firm pays $ 11,900 in preferred stock dividends.

What are earnings before interest and taxes for 2000?

Use the following to answer questions 7-15: 1999 2000 Sales $2900 $3300 Cogs $2030 $2310 Interest $410 $420 Dividends $56 $79 Depreciation $290 $330 Cash $250 $150 Receiviables $242 $412 Current liabilities $900 $1100 Inventory $1015 $900 Long Term Debt $3200 $3100 Net Fixed Assets $6000 $5700 Tax Rate 34% 34% 7. What are earnings before interest and taxes for 2000? A) $112 B) $158 C) $580 D) $660 E) $780 ...

Billco Corporation expects earnings before interest and taxes to be $450,000 for the current tax year....

Billco Corporation expects earnings before interest and taxes to be $450,000 for the current tax year. Using the U.S. corporate flat tax rate of 21%, compute the Billco’s earnings available for common stockholders if the firm pays $25,000 in interest versus $25,000 in preferred stock dividends. Answers: A.) $371,000; $347,000 B.) $357,080; $357,080 C.) $335,750; $330,500 D.) $376,040; $352,040

Kaelea, Inc., has no debt outstanding and a total market value of $90,000. Earnings before interest...

Kaelea, Inc., has no debt outstanding and a total market value of $90,000. Earnings before interest and taxes, EBIT, are projected to be $8,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 20 percent higher. If there is a recession, then EBIT will be 30 percent lower. The company is considering a $34,000 debt issue with an interest rate of 6 percent. The proceeds will be used to repurchase shares of...

Question