ebit $300, tax rate is 30% and depreciation is 20%, what is the cash flow in...

ebit $300, tax rate is 30% and depreciation is 20%, what is the cash flow in period 4? They have the depreciation table showing 0.402 for 20% period 4. Does that help?

Expert Solution

Cash flow for period 4		$
EBIT		300
Add:- cash flow due to depreciation @ 30	=.402*30%	0.1206
Cash flow for period 4		300.1206

Notes :-
since the details of interest is not given therefore the same has not been considered
As per the tax provision the company can claim the depreciation as expenses which is a non cash expenses so there wont be any cash outflow on account of claiming depreciation instead there would inflor of cash due to tax benefit because it is tax deductible expenses which will save taxes to the extent of =Depreciation*tax rate
The information of depreciation will help in calculating the cash inflow as it is a non cash expenses
It is assumed that EBIT is before deducting the depreciaiotn if it is assumed that depreciation is already deducted in calculating the EBIT then cash flow would be as follows

EBIT	300
add: depreciaion	0.402
Add; tax saving on depreciation	0.1206
Cash inflow	300.5226

ekkarill92 answered 1 year ago

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