2 a. In problem 1, how much would cash flow be if there were only $10,000 in depreciation? All other factors are the same b. How much cash flow is lost due to the reduced depreciation between problems I and 2a? Solution: a. Earnings before depreciation and taxes $90000 Depreciation 10000 Earnings before taxes $80000 Taxes@ 30% 24000 Earnings after taxes $56.000 Depreciation +10000 Cash flow $66.000 b Cash flow(problem 1) $75.000 Cash flow(problem 2) 66.000 Difference in cash flow $9,000 CopyrightC 2005 by The McGray-Hill Companies, Inc. S-424Copyright © 2005 by The McGraw-Hill Companies, Inc. S-424 12-2. a. In problem 1, how much would cash flow be if there were only $10,000 in depreciation? All other factors are the same. b. How much cash flow is lost due to the reduced depreciation between problems 1 and 2a? Solution: a. Earnings before depreciation and taxes $90,000 Depreciation –10,000 Earnings before taxes $80,000 Taxes @ 30% –24,000 Earnings after taxes $56,000 Depreciation +10,000 Cash flow $66,000 b. Cash flow (problem 1) $75,000 Cash flow (problem 2) 66,000 Difference in cash flow $ 9,000