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Cash flow (LO12-2) Assume a corporation has earnings before depreciation and taxes of $100,000, depreciation of $40,000, and that it has a 24 percent tax
Cash flow (LO12-2) Assume a corporation has earnings before depreciation and taxes of $100,000, depreciation of $40,000, and that it has a 24 percent tax bracket.
a. Compute its cash flow using the following format:
Earnings before depreciation and taxes _____
Depreciation _____
Earnings before taxes _____
Taxes @ 24% _____
Earnings after taxes _____
Depreciation _____
b. Compute the cash flow for the company if depreciation is only $20,000.
c How much cash flow is lost due to the reduced depreciation from $40,000 to $20,000?
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