Assume a corporation has earnings before depreciation and taxes of $82,000, depreciation of $45,000, and that it has a 30% tax bracket. What are the after-tax cash flows for the company?

Question

Quizplus · Accepted Answer

Step 1: Calculate earnings before taxes

EBT = Earnings before depreciation and taxes - Depreciation 
EBT = $82,000 - $45,000 = $37,000

Step 2: Calculate taxes

Taxes = EBT x Tax rate 
Taxes = $37,000 x 0.30 = $11,100

Step 3: Calculate after-tax cash flows

After-tax cash flows = Earnings before depreciation and taxes - Taxes - Depreciation 
After-tax cash flows = $82,000 - $11,100 - $45,000 = $25,900

Therefore, the after-tax cash flows for the company are $25,900 which is option A.

Assume a Corporation Has Earnings Before Depreciation and Taxes of $82,000