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Assume a corporation has earnings before depreciation and taxes of $100,000, depreciation of $40,000, and a 24 percent tax bracket a. Compute its cash flow
Assume a corporation has earnings before depreciation and taxes of $100,000, depreciation of $40,000, and a 24 percent tax bracket a. Compute its cash flow using the following format. Earnings before depreciation and taxes Depreciation Earnings before taxes Taxes Earnings after taxes Depreciation Cash flow es 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 Assume a $40,000 investment and the following cash flows for two alternatives. Year Investment X $ 6,00 8,000 9,800 17,eee 20,000 Investment y $15, ege 20,800 10,000 a. Calculate the payback for investment X and Y. (Do not round Intermediate calculations. Round your answers to 2 decimal places.) Payback Investment X years Investment years des b. Which alternative would you select under the payback method? O Investment X Investment Y
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