1. Assume a corporation has earnings before depreciation and taxes of $113,000, depreciation of $40,000, and that it has a 30 percent tax bracket.

a. Compute its cash flow using the following format. (Input all answers as positive values.)

b. How much would cash flow be if there were only $13,000 in depreciation? All other factors are the same.

c. How much cash flow is lost due to the reduced depreciation from $40,000 to $13,000?

2.

Assume a $70,000 investment and the following cash flows for two alternatives.

Year	Investment A			Investment B
1	$	15,000		$	30,000
2		20,000			30,000
3		23,000			20,000
4		15,000
5		15,000

a. Calculate the payback for investment A and B. (Round your answers to 2 decimal places.)

b. Which investment would you select under the payback method?

	Investment A
	Investment B

c. If the inflow in the fifth year for Investment A was $15,000,000 instead of $15,000, would your answer change under the payback method?

	Yes
	No