Question

After-Tax Cash Flows

Using the data that is shown below - (a) calculate the individual after-tax cash flow effect of each relevant item in each independent situation, and (b) sum the individual after-tax cash flows in each situation to determine the overall net after-tax cash flow.

	A	B	C
Cash revenue received	220,000	1,050,000	550,000
Cash operating expenses paid	128,000	770,000	330,000
Depreciation on tax return	28,000	64,000	50,000
Income tax rate	30%	25%	20%

Do not use negative signs with any of your answers below.

		A	B	C
(a)	Cash revenue	Answer	Answer	Answer
	Cash operating expenses	Answer	Answer	Answer
	Depreciation expense	Answer	Answer	Answer
(b)	Net after-tax cash flow	Answer	Answer	Answer

Answer 1

Solution:
(a)		A	B	C
	Cash Revenue (A)	$154,000	$787,500	$440,000
		[$220,000*(1-0.30)]	[$1,050,000*(1-0.25)]	[$550,000*(1-0.20)]
	Cash Operating expenses(B)	$89,600	$577,500	$264,000
		[$128,000*(1-0.30)]	[$770,000*(1-0.25)]	[$330,000*(1-0.20)]
	Depreciation ( C)	$8,400	$16,000	$10,000
		[$28,000*30%]	[$64,000*25%]	[$50,000*20%]
(b)	Net after tax cash flows A-B+C	$72,800	$226,000	$186,000
Working note:
After tax revenue = Revenue(1-tax rate)
After tax Operating expenses = Operating expenses(1-tax rate)
After tax depreciation = Depreciation * tax rate
After tax cash flow = After tax revenue - after tax operating expenses+depreciation tax sheild
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