1. Jenkins Properties had gross fixed assets of $1,000 at the end of 2010. By the end of 2011, these had grown to $1,100. Accumulated depreciation at the end of 2010 was $500, and it was $575 at the end of 2011. Jenkins has no interest expenses. Jenkins expected sales during 2011 to total $500. Operating expenses (exclusive of depreciation) were forecasted to be $125. Jenkins's marginal tax rate is 40 percent.
a. What was Jenkins's 2011 depreciation expense?
b. What was Jenkins's 2011 earnings after taxes (EAT)?
c. What was Jenkins's 2011 after-tax cash flow using Equation 4.1?
d. Show that EAT less the increase in net fixed assets is equivalent to after-tax cash flow less the increase in gross fixed assets.