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Assume a project has earnings before depreciation and taxes of $15,000, depreciation of $25,000, and that...

Assume a project has earnings before depreciation and taxes of $15,000, depreciation of $25,000, and that the firm has a 25% tax bracket. What are the after-tax cash flows for the project? Seleccione una: a. $15,000 b. $17,500 c. $28,000 d. $17,000 e. ($21,000) f. $19,000 g. $18,000 h. Can't be determined

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Answer #1

Calculation of After Tax Cash Flows for the project:

Calculation of After Tax Cash Flow
Particular Amount
Earnings before Depriciation 15000
Less: Depriciation -25000
Earnings before Taxes (15000-25000) -10000
Add: Tax Saving (25% of 10000) 2500
Net Earnings after Taxes (-10000+2500) -7500
Add: Depriciation (Being Non Cash Item) 25000
After Tax Cash Flow from Project                  (-7500+25000) 17500

Therefore option (b) is correct i.e. $ 17500

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