/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q4BP Assume a firm has earnings befor... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 4: Q4BP (page 408)

Assume a firm has earnings before depreciation and taxes of \(440,000 and depreciation of \)140,000.

a. If it is in a 35 percent tax bracket, compute its cash flow.

b. If it is in a 20 percent tax bracket, compute its cash flow.

Short Answer

Expert verified

Answer

  1. Cash flow when the tax rate is 35%:$335,000.

  2. Cash flow when the tax rate is 40%: $380,000.

Step by step solution

01

Definition of Income Tax

The expense incurred against the taxable income earned by the business entity is known as income tax. It is a fee the government charges over the income earned more than the prescribed limit.

02

Calculation of cash flow when tax bracket is 35%

Particular

Amount $

Earnings before depreciation and taxes

$440,000

Less: Depreciation

(140,000)

Earnings before tax

300,000

Less: tax @35%

(105,000)

Earnings after tax

195,000

Add: Depreciation

140,000

Cash flow

$335,000

03

Calculation of cash flow when tax bracket is 20%

Particular

Amount $

Earnings before depreciation and taxes

$440,000

Less: Depreciation

(140,000)

Earnings before tax

300,000

Less: tax @20%

(60,000)

Earnings after tax

240,000

Add: Depreciation

140,000

Cash flow

$380,000

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Evans Emergency Response bonds have six years to maturity. Interest is paid semi annually. The bonds have a \(1,000 par value and a coupon rate of 8 percent. If the price of the bond is \)1,073.55, what is the annual yield to maturity?

Why does money have a time value?

At a growth (interest) rate of 10 percent annually, how long will it take for a sum to double? To triple? Select the year that is closest to the correct answer

If your uncle borrows $60,000 from the bank at 10 percent interest over the seven-year life of the loan, what equal annual payments must be made to discharge the loan, plus pay the bank its required rate of interest (round to the nearest dollar)? How much of his first payment will be applied to interest? To principal? How much of his second payment will be applied to each?

How is the valuation of any financial asset related to future cash flows?
See all solutions

Recommended explanations on Business Studies Textbooks

Strategic Direction

Read Explanation

Managerial Economics

Read Explanation

Managers

Read Explanation

Insurance

Read Explanation

Organizational Communication

Read Explanation

Accounting

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.