Northstar,Inc.had sales of $650,000 and operating expenses of $480,000 for the year just ended.Included in the operating expenses was $35,000 of depreciation expense.If Northstar's income tax rate is 40%,its net after-tax cash flows amounted to:

Question

Quizplus · Accepted Answer

First, we need to calculate Northstar's earnings before taxes (EBT), which is:
EBT = Sales - Operating Expenses
EBT = $650,000 - $480,000
EBT = $170,000

Next, we need to calculate the taxes owed on EBT, which is:
Taxes = EBT x Tax Rate
Taxes = $170,000 x 0.40
Taxes = $68,000

Now we can calculate Northstar's net after-tax cash flows, which is:
Net after-tax cash flows = EBT - Taxes + Depreciation
Net after-tax cash flows = $170,000 - $68,000 + $35,000
Net after-tax cash flows = $137,000

Therefore, the best choice is C, with net after-tax cash flows of $137,000.