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A Profitable Company Pays $100,000 Wages and Has Depreciation Expense

Question 104

Multiple Choice

A profitable company pays $100,000 wages and has depreciation expense of $100,000.The company's income tax rate is 40%.The after-tax effects on cash flow are a net cash outflow of:

A) $40,000 for wages and a net cash inflow of $60,000 for depreciation expenses.
B) $40,000 for wages and a net cash inflow of $40,000 for depreciation expenses.
C) $60,000 for wages and a net cash inflow of $60,000 for depreciation expenses.
D) $60,000 for wages and a net cash inflow of $40,000 for depreciation expenses.
E) $40,000 for wages and a net cash inflow of $100,000 for depreciation expenses.

Correct Answer: