How much cash flow before tax and interest is necessary to support a project if $2 million is used to pay interest, the tax rate is 21%, and

Question

How much cash flow before tax and interest is necessary to support a project if $2 million is used to pay interest, the tax rate is 21%, and equity investors require annual income of $4 million?

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RI SƠ 3 years 2021-07-26T00:14:47+00:00 1 Answers 19 views 0

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  1. Bo
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    2021-07-26T00:15:55+00:00
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    Answer:

    The necessary cash flow is $ 7,594,936.70.

    Step-by-step explanation:

    To determine the cash flow necessary before taxes and interest to support the project if $ 2 million is used to pay interest, the tax rate is 21%, and equity investors require annual income of $ 4 million, the following calculation must be performed:

    X – 0.21X – 2,000,000 = 4,000,000

    X – 0.21X = 4,000,000 + 2,000,000

    0.79X = 6,000,000

    X = 6,000,000 / 0.79

    X = 7,594,936.70

    Therefore, the necessary cash flow is $ 7,594,936.70.

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