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2 August, 07:54

The Moore Corporation had operating income (EBIT) of $700,000. The company's depreciation expense is $140,000. Moore is 100% equity financed, and it faces a 40% tax rate. Assuming no changes to any of the Balance Sheet accounts, what is its net cash flow?

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  1. 2 August, 08:07
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    The net cash flow is $560,000

    Explanation:

    The computation of the net cash flow is shown below:o

    = Operating income + depreciation - tax expense

    = $700,000 + $140,000 - $280,000

    = $560,000

    The tax expense is calculated by

    = Operating income * tax rate

    = $700,000 * 40%

    = $280,000

    For computing the net cash flow, we have to add the depreciation expense and deduct the income tax expense.
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