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Project's cash flows

1) For a capital budgeting proposal, assume this year's cash sales are forcast to be $220, cash expenses $130, and depreciation $80. Assume the firm is in the 30% tax bracket. Is it possible to determine the projects after tax cash flow.

2) A restaurant is considering an expansion. Construction will cost $90,000 and will be depreciated to zero, using straight line depreciation, over 5 years. Earnings before depreciation are expected to be $20,000 in each of the next 5 years. The restaurant's tax rate is 34%. What are the projects cash flows. Please expalin calculation if possible.

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1) For a capital budgeting proposal, assume this year's cash sales are forcast to be $220, cash expenses $130, and depreciation $80.
Assume the firm is in the 30% tax bracket. Is it possible to determine the projects after tax cash flow.

Project's after tax cash flow is:

Sales 220
Less Expenses 130
EBDT 90
Less Depreciation 80
Profit before tax 10
Less taxes 3
Profit after taxes 7
Add Depreciation 80
Cash flow after taxes 87

2) A restaurant is considering an ...

Solution Summary

This helps in computation of projects cash flows with the help of various examples

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