Problem 12-3 Cash flow [LO12-2]

Assume a firm has earnings before depreciation and taxes of $530,000 and no depreciation. It is in a 40 percent tax bracket.

a. Compute its cash flow. cash flow:..........

b. Assume it has $530,000 in depreciation. Recompute its cash flow.

cash flow:......... c. How large a cash flow benefit did the depreciation provide? Benefit on cash flow:................