EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 9, Problem 1P
a)
Summary Introduction
To determine: The after-tax operating cash flow.
b)
Summary Introduction
To determine: The after-tax operating cash flow.
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Menendez Corporation expects to sell $ 12 million. Costs, excluding depreciationtion, will represent 75% of sales and a depreciation of $ 1.5 million is expected.Sales will be collected in cash and all costs less depreciation will bebe settled during the year. The federal and state tax rate is 40%.to. Prepare an income statement. What will the company's expected net cash flow be?b. Suppose that Congress modified the tax laws and that doubled thecompany pricing. There were no changes in operations. How would it affectThat in recorded earnings and net cash flow?c. Now suppose that Congress did not double depreciation but reduced it byfifty%. How will that affect net cash flow?d. If it were your company, would you prefer Congress to double depreciation spendingtion or cut it in half? Explain your answer.
Your firm has the following income statement items: sales of $52,000,000;
income tax of $1,880,000; operating expenses of $9,000,000; cost of goods sold
of $36,000,000; depreciation and amortization of $1,500,000; and interest
expense of $800,000. For purposes of determining free cash flow, what is the
amount of the firm's after-tax cash flow from operations?
O $750,000
O $3,600,000
O $1,008,000
O $5,120,00O
Gabbert’s Corporation expects to have sales of $15 million. Costs other than depreciations are expected to be 77% of sales, and depreciation is expected to be $1.8 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. The federal tax rate is 25%. Interest expense is $210,000.
1. Set up an income statement. What is Gabbert’s expcted net income? Its expected net cash flow?
2. Suppose Congress changed the tax laws so that Gabbert’s depreciation expenses went up by 60%. No changes in operations occurred. What would happen to the reported profit and to net cash flow?
3. Now suppose that Congress changed the tax laws such that, instead of increasing Gabbert’s depreciation, it was reduced by 60%. How would the profit and the net cash flow be affected?
4. If this were your company, would you prefer Congress to cause your depreciation expense to be increased or reduced? Why?
Chapter 9 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Ch. 9.A - Prob. 1QTDCh. 9.A - Prob. 1PCh. 9.A - Prob. 2PCh. 9.A - Prob. 3PCh. 9.A - Prob. 4PCh. 9.A - Prob. 5PCh. 9 - Prob. 1QTDCh. 9 - Prob. 2QTDCh. 9 - Prob. 3QTDCh. 9 - Prob. 4QTD
Ch. 9 - Prob. 5QTDCh. 9 - Prob. 6QTDCh. 9 - Prob. 7QTDCh. 9 - Prob. 8QTDCh. 9 - Prob. 9QTDCh. 9 - Prob. 10QTDCh. 9 - Prob. 11QTDCh. 9 - Prob. 1PCh. 9 - Prob. 2PCh. 9 - Prob. 3PCh. 9 - Prob. 4PCh. 9 - Prob. 5PCh. 9 - Prob. 6PCh. 9 - Prob. 7PCh. 9 - Prob. 8PCh. 9 - Prob. 9PCh. 9 - Prob. 10PCh. 9 - Prob. 11PCh. 9 - Prob. 12PCh. 9 - Prob. 13PCh. 9 - Prob. 14PCh. 9 - Prob. 15PCh. 9 - Prob. 16PCh. 9 - Prob. 17PCh. 9 - Prob. 18PCh. 9 - Prob. 19PCh. 9 - Prob. 20PCh. 9 - Prob. 21PCh. 9 - Prob. 22P
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- Free Inc. has after tax operating income of $100 million. It is depreciation is $20million. The capital expenditure is $50million. Its NWC increase for $30 million, the excess cash increases for $5 million, and note payable decreases $1 million. What is the firm's free cash flow during the fiscal year in consideration (in million)? a)45 b)44 c)46 d)48arrow_forwardForaker Inc. has sales of $46,200, costs of $23,100, depreciation expense of $2200, and interest expense of $1700. If tax rate is 22%, the operating cash flow (OCF) is:arrow_forwardGraff, Incorporated, has sales of $55,000, costs of $25,000, depreciation expense of $2,750, and interest expense of $2,500. If the tax rate is 23 percent, what is the operating cash flow, or OCF? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Operating cash flowarrow_forward
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