What is the levered after-tax incremental cash flow for year 4?

Question

Quizplus · Accepted Answer

To calculate the levered after-tax incremental cash flow for year 4, we need to calculate the levered cash flow (LCF) and then subtract the taxes paid on that cash flow. 
LCF for year 4 = EBITDA - Depreciation - Amortization - Capital Expenditures - change in Net Working Capital 
LCF for year 4 = $725,000,000 - $135,000,000 - $40,000,000 - $285,000,000 - (-$65,000,000) 
LCF for year 4 = $290,000,000 
Taxes on LCF for year 4 = 40% of ($290,000,000 - $100,000,000) 
Taxes on LCF for year 4 = $76,000,000 
Levered after-tax incremental cash flow for year 4 = LCF for year 4 - Taxes on LCF for year 4 
Levered after-tax incremental cash flow for year 4 = $290,000,000 - $76,000,000 = -$194,848,000 
Therefore, the answer is C.

What Is the Levered After-Tax Incremental Cash Flow for Year