Chris Bergman chapter3

Chris Bergman chapter3 - Chris Bergman Principles of...

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Chris Bergman Principles of Finance SECTION 25049 OPC 004 October 2, 2008 christopherbergman@g.austincc.edu Chapter 3 3) a. Sales Revenue $400,000 Less: Total costs before depreciation, interest, and Taxes 290,000 Depreciation expense 34,000 Interest expense 15,000 Earnings before taxes $60,800 Less: Taxes $24,320 Earnings after taxes $36,480 Plus: Depreciation 34,200 Cash flow from operations $70,680 b. Depreciation affects cash flow because the time period over which an asset is depreciated, it depreciable life, can significantly affect the pattern of cash flows. The shorter the depreciable life, more quickly the cash flow created by the depreciation write-off will be received. A shorter depreciable life is preferred to a longer one. A noncash charge is an expense that is deducted on the income statement but does not involve the actual outlay of cash during the period; includes depreciation, amortization, and depletion. 5) a. $3,000
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Chris Bergman chapter3 - Chris Bergman Principles of...

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