Last year Curative Technologies Inc. reported after-tax earnings of $23 million. Included in the expenses were depreciation of $3.7 million and interest expenses of $2.9 million. The year-end balance sheets shows an increase in deferred taxes of $2.6 million to a total of $14.2 million. What is Curative Technologies' after-tax cash flow for last year? Assume a marginal tax rate of 40%.

Question

Quizplus · Accepted Answer

To find the after-tax cash flow, we need to start with the after-tax earnings and then add back non-cash expenses like depreciation and subtract interest expenses. We also need to adjust for changes in deferred taxes.

After-tax earnings = $23 million 
Depreciation = $3.7 million 
Interest expenses = $2.9 million

Earnings before taxes = After-tax earnings / (1 - Tax rate) 
Earnings before taxes = $23 million / (1 - 0.4) = $38.33 million

After-tax cash flow = Earnings before taxes + Depreciation - Interest expenses - Change in deferred taxes 
After-tax cash flow = $38.33 million + $3.7 million - $2.9 million - $2.6 million = $29.53 million

Therefore, the answer is (C) $29.3 million.

Last Year Curative Technologies Inc