Assume a corportation has earnings before depreciation and taxes of $100,000, depreciation of $50,000, and is in a 30% percent tax bracket. Compute its cash flow using the format. Earnings before depreciation and taxes Depreciation Earnings before taxes Taxes @ 30% Earnings after taxes Depreciation 2a) In problem 1 , how much would cash flow be if there were only $10,000 in depreciation ? All other factors are the same. 2b) How much cash flow is lost due to the reduced depreciation between Problems 1 and 2a?

Assume a corportation has earnings before depreciation and taxes of $100,000, depreciation of $50,000, and is in a 30% percent tax bracket. Compute its cash flow using the format. Earnings before depreciation and taxes Depreciation Earnings before taxes Taxes @ 30% Earnings after taxes Depreciation 2a) In problem 1 , how much would cash flow be if there were only $10,000 in depreciation ? All other factors are the same. 2b) How much cash flow is lost due to the reduced depreciation between Problems 1 and 2a?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter6: Accounting For Financial Management

Section: Chapter Questions

Problem 11P: The Berndt Corporation expects to have sales of 12 million. Costs other than depreciation are...

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Concept explainers

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.

Question

Assume a corportation has earnings before depreciation and taxes of $100,000, depreciation of $50,000, and is in a 30% percent tax bracket. Compute its cash flow using the format.

Earnings before depreciation and taxes

Depreciation

Earnings before taxes

Taxes @ 30%

Earnings after taxes

Depreciation

2a) In problem 1 , how much would cash flow be if there were only $10,000 in depreciation ? All other factors are the same.

2b) How much cash flow is lost due to the reduced depreciation between Problems 1 and 2a?

Definition Video Definition Accounting method wherein the cost of a tangible asset is spread over the asset's useful life. Depreciation usually denotes how much of the asset's value has been used up and is usually considered an operating expense. Depreciation occurs through normal wear and tear, obsolescence, accidents, etc. Video

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