Scorch & Burn Fire Extinguishers, Inc. had an operating income (EBIT) of $260,00 last year. The firm had $18,000 in depreciation expenses, $15,000 in interest expenses and $60,000 in selling, general, and administrative expenses. If Scorch & Burn has a marginal tax rate of 40%, what was its after-tax cash flow for last year?
A) $165,000
B) $129,000
C) $174,000
D) $147,000

Question

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Solution:
EBIT = $260,000 - $15,000 = $245,000
EAT = $245,000(1 - 0.40) = $147,000
ATCF = $147,000 + $18,000 = $165,000