Assume a corporation has earnings before depreciation and taxes of $100,000, depreciation of $40,000, and that it has a 40 percent tax bracket.

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

Earnings before depreciation and taxes $

Depreciation

Earnings before taxes $

Taxes

Earnings after taxes $

Depreciation

Cash flow $

b. Compute the cash flow for the company if depreciation is only $20,000. All other factors are the same.

Cash flow $

c. How much cash flow is lost due to the reduced depreciation from $40,000 to $20,000?

Cash flow lost $