Tyson Company has a pre-tax net cash inflow of $1,200,000. The company can claim depreciation expense of $500,000 this year, and is subject to a combined income tax rate of 26%. What is the after-tax cash inflow for the year?
A) $700,000.
B) $1,018,000.
C) $182,000.
D) $370,000.
E) $1,200,000.

Question

Quizplus · Accepted Answer

To calculate the after-tax cash inflow, we need to first calculate the taxable income. Taxable income is calculated as pre-tax net cash inflow minus depreciation expense, which gives us $1,200,000 - $500,000 = $700,000. Applying the combined income tax rate of 26%, the tax liability will be $700,000 x 0.26 = $182,000. Therefore, the after-tax cash inflow will be $1,200,000 - $182,000 = $1,018,000.

Tyson Company Has a Pre-Tax Net Cash Inflow of $1,200,000