Earnings AFTER depreciation is 60,000, and the (30%) tax on that taxable income is 18,000.
After-tax cash flow is then 100,000 - 18,000 = $82,000.
Question 17 answers
After-tax cash flow is then 100,000 - 18,000 = $82,000.
1. Depreciation: Since depreciation is a non-cash expense, it does not affect the company's cash flow. Therefore, we can consider the earnings before depreciation and taxes as the company's cash flow before taxes.
Earnings before depreciation and taxes: $100,000
2. Taxes: To calculate the taxes, we need to multiply the earnings before depreciation and taxes by the tax rate.
Tax rate: 30%
Tax = Earnings before depreciation and taxes * Tax rate
= $100,000 * 30%
= $30,000
After-tax cash flows = Earnings before depreciation and taxes - Tax
= $100,000 - $30,000
= $70,000
Therefore, the after-tax cash flows for the company are $70,000.
1. Calculate the taxable income:
Taxable Income = EBDT - Depreciation
Taxable Income = $100,000 - $40,000 = $60,000
2. Calculate the taxes:
Taxes = Taxable Income * Tax Rate
Tax Rate = 30% (as given)
Taxes = $60,000 * 0.30 = $18,000
3. Calculate the after-tax cash flows:
After-Tax Cash Flows = EBDT - Taxes + Depreciation
After-Tax Cash Flows = $100,000 - $18,000 + $40,000 = $122,000
Therefore, the after-tax cash flows for the company are $122,000.