A. The NOI is $1,000,000, the debt service is $800,000 of which $700,000 is interest, the...

Question:

A. The NOI is $1,000,000, the debt service is $800,000 of which $700,000 is interest, the depreciation expense is $250,000. What is the after-tax cash flow to the equity investor if the income tax rate is 33%? Question options:

$183,500. $182,500. $195,000. $650,000

After tax cash flow:

After tax cash flow refers to the earnings of the company earned in cash over an accounting period. It is given as the net income plus the non cash expenses minus the non cash incomes.

Answer and Explanation:

The calculation of After tax cash flow is as follows:

Net Operating Income = $1,000,000.00

Add: Tax = 1,000,000 x 33 / 67 = $492,537.31

Operating income before tax = $1,492,537.31

Less: Interest = $700,000.00

Earnings before tax = $792,537.31

Less: Tax @ 33% = $261,537.31

Net Income = $531,000.00

Add: Depreciation = $250,000.00

After tax cash flow = $781,000.00


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What Is Cash Flow? - Definition, Calculation & Example

from Corporate Finance: Help & Review

Chapter 8 / Lesson 14
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