Problemassume a firm has earnings before depreciation and, Ask an Expert

Accounting

Problem:

Assume a firm has earnings before depreciation and taxes of $500,000 and no depreciation. It is in a 40% tax bracket.

Requirement:

Question 1: Compute cash flow

Question 2: Assume it has $500,000 in depreciation. Recompute cash flow.

Question 3: How large a cash flow benefit did the depreciation provide?

Note: Explain all calculation and formulas.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91169689

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