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Assume a firm has earnings before depreciation and taxes Assume a firm has earnings before depreciation and taxes of
$200,000 and no depreciation. It is in a 40 percent tax bracket.a. Compute its cash flow.b. Assume it has $200,000 in depreciation. Recompute its
cash flow.c. How large a cash flow benefit did the depreciation
provide?
d. Would the president of a firm on the New York Stock
Exchange likely be satisfied with the earnings after taxes results in part c?
Why or Why not?