Answer (B) is correct . The tax on $100,000 would be $35,000. Note that depreciation would have already been deducted in calculating the $100,000 of before-tax profit. Thus, cash flows from operations must have been $120,000. Deducting the $35,000 of taxes from the $120,000 leaves net cash inflows of $85,000.
Answer (A) is incorrect because The amount of $65,000 fails to consider that depreciation is a noncash expense.
Answer (C) is incorrect because The amount of $92,000 based taxes on $120,000 rather than $100,000.
Answer (D) is incorrect because The amount of $98,000 based taxes on $80,000 rather than $100,000.
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