Estimate the CFAT for a company that has taxable income of $120,000, depreciation of $133,350, and an effective tax rate of 35%.
What will be an ideal response?
Use TI = GI – OE – D and CFBT = GI – OE = TI + D
Taxes = TI(Te) = 120,000(0.35) = $42,000
CFAT = CFBT – taxes
= TI + D – taxes
= 120,000 + 133,350 – 42,000
= $211,350
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