and administrative expense is $160,000 for each company. Given that the tax rate is 40 percent, compute the cash flow for both companies. Explain the difference in cash flow between the two firms. ( 30 points). 3. What causes the Price of Stock in a company? What are the six variables that affect the price-earnings ratio? (20 points) 4. Explain how depreciation generates actual cash flow for the company. (10 points). 5. Explain the two reasons why the statement of cash flows provides useful information that goes beyond income statement and balance sheet data.:(10 points)