East Ridge Company is considering a capital project that delivers a $58,500 annual net cash inflow before tax

Accounting Apr 01, 2021

East Ridge Company is considering a capital project that delivers a $58,500 annual net cash inflow before tax. The investment will result in annual depreciation expense of $13,400 over the project's four-year useful life. Assuming a tax rate of 40%, what amount of annual after-tax net cash flow will be provided by this project?

Expert Solution

Computation of Annual After-tax Net Cash Flow:
Particulars	Amount
Net Cash Inflow before Tax	$58,500
Less: Annual Depreciation	$13,400
Profit before Tax	$45,100
Less: Taxes @40%	$18,040
Profit after Taxes	$27,060
Add: Depreciation	$13,400
Annual After-tax Net Cash Flow	$40,460

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