Question
Imagine the small firm called DG. DGs CEO Debayan built a very stable firm with a constant income stream of 100,000$ per fiscal year at
Imagine the small firm called DG. DGs CEO Debayan built a very stable firm with a constant income stream of 100,000$ per fiscal year at annual costs of 15,000$. DG faces a 20 % tax rate, no capital expenses or change in NWC yet $5,000 in depreciation annually.
(a) What is the FCF?
Imagine now the tax rate increases to 25%
b) What is the FCF?
Let us now consider changes in depreciation. If depreciation is $10,000, what is FCF?
(c) At a 20% tax rate
Let us now consider changes in depreciation.If depreciation is $10,000, what is FCF?
(d) At a 25% tax rate
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