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

Question

Quizplus · Accepted Answer

First, we need to calculate the earnings before taxes (EBT):
EBT = Earnings before depreciation and taxes - Depreciation 
EBT = $82,000 - $45,000 
EBT = $37,000

Next, we need to calculate the taxes owed: 
Taxes = EBT x Tax rate 
Taxes = $37,000 x 0.30 
Taxes = $11,100

Finally, we can calculate the after-tax cash flow: 
After-tax cash flow = Earnings before depreciation and taxes - Depreciation - Taxes 
After-tax cash flow = $82,000 - $45,000 - $11,100 
After-tax cash flow = $70,900

Therefore, the answer is A) $70,900.

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