# b) The Moore Corporation has operating income (EBIT) of \$750,000. The company’s depreciation expense is \$200,000. Moore is 100% equity financed, and it faces a 40% tax rate. What is the company’s net income? What is its net cash flow?

Question

b) The Moore Corporation has operating income (EBIT) of \$750,000. The company’s depreciation expense is \$200,000. Moore is 100% equity financed, and it faces a 40% tax rate. What is the company’s net income? What is its net cash flow?

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Step 1

Net income = (EBIT - interest) x (1 - tax rate)

EBIT = \$ 750,000

As compnay is 100% equity finance, there will be no debt and hence interest expense = 0

Tax rate, T = 40%

Step 2

Hence, Net income = (750,000 - 0) x...

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