Please show all work! Assume a corporation has earnings before depreciation and
ID: 2623590 • Letter: P
Question
Please show all work!
Assume a corporation has earnings before depreciation and taxes of $100,000, depreciation of $50,000, and that it has a 30 percent tax bracket. Compute its cash flow using the format below.
Earnings before depreciation and taxes _____
Depreciation _____
Earnings before taxes _____
Taxes @ 30% _____
Earnings after taxes _____
Depreciation _____
Explanation / Answer
Earnings before depreciation and taxes = $ 100,000
Depreciation = $ 50,000
Earnings before taxes = Earnings before depreciation and taxes- Depreciation = $ 50,000
Taxes @ 30% = 0.3*Earnings before taxes = 0.2*50000 = $ 15,000
Earnings after taxes = Earnings before taxes - Taxes = 50000 - 15000 = $ 35,000
Depreciation = $ 50,000
Net Income = Earning after Taxes + Depreciation = $ 85,000
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