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Cash Flow Calculations

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

A. Compute its cash flow

B. Assume it has $500,000 in depreciation. Recompute its cash flow.

C. How large a cash flow benefit did the depreciation provide?

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Solution Summary

This solution is comprised of a detailed explanation to compute its cash flow, assume it has $500,000 in depreciation, recompute its cash flow, and answer how large a cash flow benefit did the depreciation provide.

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

A. Compute its cash ...

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