The Indiana Company has had a great year financially and they are wanting to better understand the amount of free cash flows that they have to invest back into the company. After having sales of $1 million, total costs of $500,000, interest expense of $50,000, depreciation of $100,000, and Capex of $90,000, what is the amount of free cash flow for the company? Assume a 35% tax rate and only use the information that is provided above. a. $220,000 C 50-100 b. $270,000 c. $237,500 d. $335,000

The Indiana Company has had a great year financially and they are wanting to better understand the amount of free cash flows that they have to invest back into the company. After having sales of $1 million, total costs of $500,000, interest expense of $50,000, depreciation of $100,000, and Capex of $90,000, what is the amount of free cash flow for the company? Assume a 35% tax rate and only use the information that is provided above. a. $220,000 C 50-100 b. $270,000 c. $237,500 d. $335,000

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter6: Accounting For Financial Management

Section: Chapter Questions

Problem 11P: The Berndt Corporation expects to have sales of 12 million. Costs other than depreciation are...

See similar textbooks

Similar questions

A company is deciding whether to launch a new product or not. The research and development cost incurred by the company for this new product is RO.30,000. The research suggests that the revenue of the company will increase by RO.25,000 per year for next 5 years. However, the new product will have additional operating expenses of RO.9,000 per year as well. If the corporation tax rate is 12%, what will be the net relevant cash flows for the first year of operations, if the product is launched? a. RO.(8,000) Negative b. None of the option c. RO.14,080 d. RO.15,080
Assume Lasher’s Kitchen has pretax earnings of $150,000 after depreciation expense of $30,000. If the firm’s tax rate is 25 percent, what is its cash flow from operations? Round your answer to the nearest dollar. $
Mojave Corporation was looking at an investment that would generate $5,000 in net income before taxes. The company's tax rate is 21%, and there would be $2,000 a year in depreciation on the assets. What is the after-tax cash flow of this investment? $4,370 $5,950 $3,050 $3,950 O None of the above
Suppose a firm's tax rate is 25%. 1. What effect would a $10.92 million operating expense have on this year's earnings? What effect would it have on next year's earnings? (Select all the choices that apply.) A. $10.92 million operating expense would be immediately expensed, increasing operating expenses by $10.92 million. This would lead to a reduction in taxes of 25%×$10.92 million=$2.73 million. B. A $10.92 million operating expense would be immediately expensed, increasing operating expenses by $10.92 million. This would lead to an increase in taxes of 25%×$10.92 million=$2.73 million C. Earnings would decline by $10.92 million−$2.73 million=$8.19 million. There would be no effect on next year's earnings. D. Earnings would decline by $10.92 million−$2.73 million=$8.19 million. The same effect would be seen on next year's earnings 2. What effect would a $10.25 million capital expense have on this year's earnings if the capital expenditure is depreciated at a rate of $2.05…
You are purchasing an equipment for $ 200,000 for your new store. Assume the store has no other expenses or revenues other than those associated with this project. You are going to purchase an additional $ 12,500 of inventory for production with the new equipment and set up a cash account with a $ 2,000 balance. The inventory purchase will result in an account payable of $ 4,500. The firm's tax rate is 20%. What is the net cash flow at time zero?
Alcon company is considering the purchase of a new assembly that will cost around $400,000. The same investment will reduce the company's cost by $150,000 each year. The tax rate is 35%. What would be the effect of the above transaction on the operating cash flows for year 2? a. Net operating cash would increase by $202,500 b. Net operating cash would increase by $205,200 c. Net operating cash would increase by $205,200 d. Net operating cash would decrease by $202,500
Let's say you are going to be an Uber driver and want to estimate your annual operating after tax cash flows. Assume the following annual estimates: -trip revenue of $20,000 -depreciation expense of $1,000 -gas and maintenance of $3,000 -insurance of $900 -tax rate of 25% - 5 year project - 10% discount rate - for sake of calculation ease, all cash flows occur on the last day of the year. What is the present value of your OCF? $61,031 $49,565 $36,861 $57,240 $28,000
Jeff's Auto Repair is looking at making an investment of $732,000 in new machinery. They expect to generate the following Earnings Before Amortization and Taxes as well as the following positive, after-tax cash flows: Cash flows Year Earnings before amortization & taxes (after tax) 1 $ 197,000 $174,500 2 232,000 199,000 3 276,000 229,800 4 209,000 182,900 5 247,000 209,500 229,000 196,900 (a) Required: Compute the Average Accounting Return assuming the asset will be fully depreciated over the six-year time period, using straight-line depreciation, and Jeff's Auto Repair has a 30 percent tax rate. (Round your answer to two decimal places (e.g. 12.34%)) (b) Compute the payback period in years, and the internal rate of return for the project (c) Compute net present value of the project if WACC is 11 percent. (d) Should the project be undertaken, and why?
Suppose a firm’s tax rate is 25%. 1. What effect would a $9.26 million operating expense have on this year's earnings? What effect would it have on next year's earnings? (Select all the choices thatapply.) A. A $9.26 million operating expense would be immediately expensed, increasing operating expenses by $9.26 million. This would lead to a reduction in taxes of 25%×$9.26 million=$2.32 million. B. A $9.26 million operating expense would be immediately expensed, increasing operating expenses by $9.26 million. This would lead to an increase in taxes of 25%×$9.26 million =$2.32 million. C. Earnings would decline by $9.26 million−$2.32 million=$6.94 million. The same effect would be seen on next year's earnings. D. Earnings would decline by $9.26 million−$2.32 million=$6.94 million. There would be no effect on next year's earnings. 2. What effect would a $11.75 million capital expense have on this year's earnings if the capital expenditure is depreciated at a rate of $2.35 million…
You are evaluating a new product. In year 3 of your analysis, you are projecting pro forma sales of $4.4 million and cost of goods sold of $2.64 million. You will be depreciating a $1 million machine for 5 years using straight-line depreciation. Your tax rate is 38%. Finally, you expect working capital to increase from $200,000 in year 2 to $295,000 in year 3. What are your pro forma earnings for year 3? What are your pro forma free cash flows for year 3? Complete the following pro forma statement. (Round to the nearest dollar.) Pro Forma Year 3 Sales COGS Depreciation EBIT Tax Earnings Depreciation Net working capital Free cash flows $
You are evaluating a new product. In year 3 of your analysis, you are projecting pro forma sales of $5.8 million and cost of goods sold of $3.48 million. You will be depreciating a $2 million machine for 5 years using straight-line depreciation. Your tax rate is 33%. Finally, you expect working capital to increase from $190,000 in year 2 to $305,000 in year 3. What are your pro forma earnings for year 3? What are your pro forma free cash flows for year 3? Complete the following pro forma statement. (Round to the nearest dollar.) Pro Forma Year 3 Sales $ COGS Depreciation EBIT Tax Earnings Depreciation Net working capital Free cash flows
Let's say you are going to be an Uber driver and want to estimate your annual operating after tax cash flows. Assume the following annual estimates: -trip revenue of $20,000 -depreciation expense of $1,000 -gas and maintenance of $3,000 -insurance of $900 -tax rate of 25% - 5-year project - 10% discount rate - for sake of calculation ease, all cash flows occur on the last day of the year. What is the present value of your OCF? Use the $ symbol and round to the nearest dollar