EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 9, Problem 20P
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To determine: The projected after-tax operating cash flow.
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Steber Packaging Inc. expects sales next year of $51 million. Of this total, 25 percent is expected to be for cash and the balance will be on credit, payable in 30 days. Operating expenses are expected to total $26 million. Accelerated depreciation is expected to total $10 million, although the company will only report $6 million of depreciation on its public financial reports. The marginal tax rate for Steber is 34 percent. Current assets now total $25 million and current liabilities total $16 million. Current assets are expected to increase to $29 million over the coming year. Current liabilities are expected to increase to $22 million. Compute the projected after-tax operating cash flow for Steber during the coming year. Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places.
Steber Packaging Inc. expects sales next year of $40 million. Of this total, 45 percent is expected to be for cash and the balance will be on credit, payable in 30 days. Operating expenses are expected to total $17 million. Accelerated depreciation is expected to total $12 million, although the company will only report $8 million of depreciation on its public financial reports. The marginal tax rate for Steber is 34 percent. Current assets now total $26 million and current liabilities total $14 million. Current assets are expected to increase to $29 million over the coming year. Current liabilities are expected to increase to $20 million. Compute the projected after-tax operating cash flow for Steber during the coming year. Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places.
$ million
The Berndt Corporation expects to have sales of $15 million. Costs other than depreciation are expected to be 80% of sales, and depreciation is expected to be $1.5 million. All
sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Brendt's federal-plus-state tax rate is 40%. Berndt has no debt.
The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.
X
THAAL
Open spreadsheet
a. Set up an income statement. What is Berndt's expected net cash flow? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as
1,200,000. Round your answer to the nearest dollar.
$
b. Suppose Congress changed the tax laws so that Berndt's depreciation expenses doubled. No changes in operations occurred. What is Berndt's expected net cash flow?
Round your answer to the nearest dollar.
$
c. Now suppose that Congress changed the…
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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- The Berndt Corporation expects to have sales of 12 million. Costs other than depreciation are expected to be 75% of sales, and depreciation is expected to be 1.5 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Berndts federal-plus-state tax rate is 40%. Berndt has no debt. a. Set up an income statement. What is Berndts expected net income? Its expected net cash flow? b. Suppose Congress changed the tax laws so that Berndts depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow? c. Now suppose that Congress changed the tax laws such that, instead of doubling Berndts depreciation, it was reduced by 50%. How would profit and net cash flow be affected? d. If this were your company, would you prefer Congress to cause your depreciation expense to be doubled or halved? Why?arrow_forwardThe Berndt Corporation expects to have sales of $12 million. Costs other than depreciation are expected to be 70% 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. Brendt's federal-plus-state tax rate is 35%. Berndt has no debt. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet Set up an income statement. What is Berndt's expected net cash flow? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar. $ fill in the blank 2 Suppose Congress changed the tax laws so that Berndt's depreciation expenses doubled. No changes in operations occurred. What is Berndt's expected net cash flow? Round your answer to the nearest dollar. $ fill in the…arrow_forwardThe Berndt Corporation expects to have sales of $12 million. Costs other than depreciation are expected to be 60% of sales, and depreciation is expected to be $2.4 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Brendt's federal-plus-state tax rate is 40%. Berndt has no debt. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. X Open spreadsheetarrow_forward
- The XYZ Corporation expects to have sales of $15 million this year. Costs other than depreciation are expected to be 80% of sales, and depreciation is expected to amount to $1 million. XYZ is using $5 million debt at 10%. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. XYZ's federalolus - state tax rate is 30%. What is XYZ's expected cash flow from operations? (Assume no other changes occurred.)arrow_forwardMenendez 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.arrow_forwardThe Cement Company has revenues of $100,000 in year 1 and it is expected to grow by 15% in year 2 and 25% in year 3. Operating expenses inclusive of depreciation are $75,000 in year 1 and are expected to increase by 10% per year, the depreciation is expected to be calculated on a straight-line method on a piece of equipment that costs $90,000, and the company marginal tax rate is 40 percent. In addition, the Cement Company expects that it will have to add about $8,000 per year to its net working capital in years 1 to 3. Calculate the company's Net (operating) cash flow for years 1, 2, and 3.arrow_forward
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