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    Depreciation

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    1. The MacCauley Company has sales of $200 million and total expenses (excluding depreciation) of $130 million. Straight-line depreciation on the companyâ??s assets is $15 million, and the maximum accelerated depreciation allowed by law is $25 million. Assume that all taxable income is taxed at 40 percent. Assume also that net working capital remains constant.

    a. Calculate the MacCauley Companyâ??s aft er-tax operating cash flow using both straightline and accelerated depreciation.

    b. Assuming that the company uses straight-line depreciation for book purposes and accelerated depreciation for tax purposes, show the income statement reported to the stockholders. What is the aft er-tax operating cash flow under these circumstances?

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    Solution Summary

    The depreciation for taxable income is examined. The response addresses the queries posted in a well explained excel file.

    $2.19