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Cash flows after tax

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(Cash flows after tax) Revenues increase by $400,000, cash operating expenses increase by $180,000, and depreciation increases by $45,000. The tax rate is 34%

a. Calculate the cash flow after tax using the formula that CFAT is operating cash flows after tax plus the depreciation tax shield.
b. Calculate the cash flow after tax using the formula that CFAT is net income plus depreciation.
c. Should the answers to a. and b. be the same?

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Solution Summary

The solution explains how to calculate cash flows after tax

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a. Operating income = 400,000-180,000=220,000
Tax = 220,000 X 34% = 74,800
Operating cash flows after tax = 220,000-74,800 = 145,200
Depreciation tax ...

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