Foundations of Financial Management
Foundations of Financial Management
16th Edition
ISBN: 9781259277160
Author: Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Publisher: McGraw-Hill Education
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Chapter 12, Problem 3P

Assume a firm has earnings before depreciation and taxes of $ 200,000 and no depreciation. It is in a 40 percent tax bracket.

a. Compute its cash flow.

b. Assume it has $ 200,000 in depreciation. Recompute its cash flow.

c. How large a cash flow benefit did the depreciation provide?

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Foundations of Financial Management

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