In the current year Spruce Corp. and Cedar Corp. will have earnings of $150,000 before interest, taxes and amortization. Both companies have $10,000 in interest costs and a tax rate of 40%. Spruce Corp. has amortization expense of $50,000 whereas Cedar Corp. has only $10,000 in amortization expense.
a. Calculate the annual net income for each company.
b. Calculate annual cash flow for each company.
c. Does the the company with the higher net income also have the higher cash flow, if not why is this happening?

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The Answer of In the current year Spruce Corp. and Cedar Corp. will have earnings of $150,000 before interest, taxes and amortization. Both companies have $10,000 in interest costs and a tax rate of 40%. Spruce Corp. has amortization expense of $50,000 whereas Cedar Corp. has only $10,000 in amortization expense.
a. Calculate the annual net income for each company.
b. Calculate annual cash flow for each company.
c. Does the the company with the higher net income also have the higher cash flow, if not why is this happening?

In the Current Year Spruce Corp