See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. Suppose Mydeco had purchased additional equipment for $12.1 million at the end of 2013, and this equipment was depreciated by $4 million per year in 2014, 2015, and 2016. Given Mydeco's tax rate of 25%, what impact would this additional purchase have had on Mydeco's net income in years 2013-2016? (Assume the equipment is paid for out of cash and that Mydeco eams no interest on its cash balances.) Hhing Calculate the new net income below: (Round to one decimal place.) is the (millions) Year 2013 2014 2015 2016 question Net Income Additional Depreciation Tax Savings New Net Income tables O Data Table 2012-2016 Financial Statement Data and Stock Price Data for Mydeco Corp. (All data as of fiscal year end; in $millions) Total Current Assets 165.8 170.2 183.6 190.5 215.9 Income Statement 2012 2013 2014 2015 2016 246.5 Net Property, Plant & Equipment Goodwill & Intangibles Total Assets 244.4 313.4 345.4 346.6 Revenue 399.9 366.8 420.6 514.3 605.8 365.8 365.8 365.8 365.8 365.8 Cost of Goods Sold Gross Profit Sales and Marketing (186.2) (175.9) 190.9 (202.9) (246.3) (290.6) 778.1 780.4 862.8 901.7 928.3 213.7 217.7 268.0 315.2 Liabilities & Stockholders' Equity Accounts Payable (67.3) (62.3) (25.3) (65.6) (57.2) (27.8) (83.0) (58.8) (34.6) (105.6) (67.6) (38.1) (123.6) (79.2) (37.5) 18.7 18.1 20.8 28.4 31.5 Administration Accrued Compensation Total Current Liabilities 6.1 7.1 7.5 7.1 10.1 Depreciation & Amortization 24.8 25.2 28.3 35.5 41.6 EBIT 58.8 40.3 41.3 56.7 74.9 Long-Term Debt Total Liabilities Stockholders' Equity Total Liabilities & Stockholders Equity Statement of Cash Flows 496.2 496.2 570.9 597.5 597.5 Interest Income (Expense) (32.9) (33.4) (32.8) (36.6) (38.6) 521.0 521.4 633.0 639.1 289.2 Pretax Income 25.9 6.9 8.5 20.1 36.3 599.2 Income Tax (6.5) (1.7) (2.1) (5.0) (9.1) 257.1 259.0 263.6 268.7 Net Income 19.4 5.2 6.4 15.1 27.2 778.1 780.4 862.8 901.7 928.3 Shares Outstanding (millions) 56.5 56.5 56.5 56.5 56.5 Earnings per Share Balance Sheet $0.34 $0.09 $0.11 $0.27 $0.48 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Net Income 19.4 5.2 6.4 15.1 27.2 Assets 34.6 Depreciation & Amortization Change in Accounts Receivable Change in Inventory Change in Pay. & Accrued Comp. 25.3 27.8 38.1 37.5 Cash 47.1 70.2 88.5 84.6 96.8 3.9 16.6 1.8 (7.2) (3.6) (8.6) Accounts Receivable 86.8 70.2 68.4 75.6 84.2 (2.9) 2.1 3.1 (4.6) Inventory 31.9 29.8 26.7 30.3 34.9 1.3 0.4 3.1 7.2 6.1 Cash from Operations 47.0 52.1 49.0 49.6 57.6 Print Done Capital Expenditures (23.2) (24.4) (100.8) (75.5) (39.4)

See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. Suppose Mydeco had purchased additional equipment for $12.1 million at the end of 2013, and this equipment was depreciated by $4 million per year in 2014, 2015, and 2016. Given Mydeco's tax rate of 25%, what impact would this additional purchase have had on Mydeco's net income in years 2013-2016? (Assume the equipment is paid for out of cash and that Mydeco eams no interest on its cash balances.) Hhing Calculate the new net income below: (Round to one decimal place.) is the (millions) Year 2013 2014 2015 2016 question Net Income Additional Depreciation Tax Savings New Net Income tables O Data Table 2012-2016 Financial Statement Data and Stock Price Data for Mydeco Corp. (All data as of fiscal year end; in $millions) Total Current Assets 165.8 170.2 183.6 190.5 215.9 Income Statement 2012 2013 2014 2015 2016 246.5 Net Property, Plant & Equipment Goodwill & Intangibles Total Assets 244.4 313.4 345.4 346.6 Revenue 399.9 366.8 420.6 514.3 605.8 365.8 365.8 365.8 365.8 365.8 Cost of Goods Sold Gross Profit Sales and Marketing (186.2) (175.9) 190.9 (202.9) (246.3) (290.6) 778.1 780.4 862.8 901.7 928.3 213.7 217.7 268.0 315.2 Liabilities & Stockholders' Equity Accounts Payable (67.3) (62.3) (25.3) (65.6) (57.2) (27.8) (83.0) (58.8) (34.6) (105.6) (67.6) (38.1) (123.6) (79.2) (37.5) 18.7 18.1 20.8 28.4 31.5 Administration Accrued Compensation Total Current Liabilities 6.1 7.1 7.5 7.1 10.1 Depreciation & Amortization 24.8 25.2 28.3 35.5 41.6 EBIT 58.8 40.3 41.3 56.7 74.9 Long-Term Debt Total Liabilities Stockholders' Equity Total Liabilities & Stockholders Equity Statement of Cash Flows 496.2 496.2 570.9 597.5 597.5 Interest Income (Expense) (32.9) (33.4) (32.8) (36.6) (38.6) 521.0 521.4 633.0 639.1 289.2 Pretax Income 25.9 6.9 8.5 20.1 36.3 599.2 Income Tax (6.5) (1.7) (2.1) (5.0) (9.1) 257.1 259.0 263.6 268.7 Net Income 19.4 5.2 6.4 15.1 27.2 778.1 780.4 862.8 901.7 928.3 Shares Outstanding (millions) 56.5 56.5 56.5 56.5 56.5 Earnings per Share Balance Sheet $0.34 $0.09 $0.11 $0.27 $0.48 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Net Income 19.4 5.2 6.4 15.1 27.2 Assets 34.6 Depreciation & Amortization Change in Accounts Receivable Change in Inventory Change in Pay. & Accrued Comp. 25.3 27.8 38.1 37.5 Cash 47.1 70.2 88.5 84.6 96.8 3.9 16.6 1.8 (7.2) (3.6) (8.6) Accounts Receivable 86.8 70.2 68.4 75.6 84.2 (2.9) 2.1 3.1 (4.6) Inventory 31.9 29.8 26.7 30.3 34.9 1.3 0.4 3.1 7.2 6.1 Cash from Operations 47.0 52.1 49.0 49.6 57.6 Print Done Capital Expenditures (23.2) (24.4) (100.8) (75.5) (39.4)

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter2: Financial Statements, Cash Flow, And Taxes

Section: Chapter Questions

Problem 12P

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