Answer:
Earning before depreciation and tax 123,000
Less: Depreciation 41,000
Earnings before tax 82,000
Less: Tax @ 35% 28,700
Earnings after tax 53,300
Add back: Depreciation 41,000
Cashflow 94,300
Explanation:
In calculating cashflow, we need to obtain the earnings after tax by considering earnings before depreciation and taxes and then deduct depreciation and taxes. Thereafter, we will add back depreciation because depreciation does not involve movement of cash. This gives the cashflow of the corporation.
