Assume a project has earnings before depreciation and taxes of $15,000, depreciation of $25,000, and that the firm has a 30% tax bracket. What are the after-tax cash flows for the project?

Question

Quizplus · Accepted Answer

The after-tax cash flow is calculated as: Earnings before depreciation and taxes + Depreciation - Taxes. Taxes are calculated on earnings before depreciation and taxes, so: $15,000 * 30% = $4,500. After-tax cash flow = $15,000 + $25,000 - $4,500 = $35,500.

Assume a Project Has Earnings Before Depreciation and Taxes of $15,000