Question
[8 pts] Big Bear Hospital is a for-profit facility that pays taxes at a rate of 40%. Big Bears management initially estimated that their annual
[8 pts] Big Bear Hospital is a for-profit facility that pays taxes at a rate of 40%. Big Bears management initially estimated that their annual depreciation expense was $100,000. In a sensitivity analysis, they updated this assumption and doubled the initial estimate. Under this new assumption about the annual depreciation expense, which of the following statements are correct? [Please show all work that led to your final answer.]
A) Big Bears net income would increase by $100,000. B) Big Bears net income would decrease by $40,000. C) Big Bears net income would decrease by $60,000. D) Big Bears approximate cash flow would increase by $100,000. E) Big Bears approximate cash flow would increase by $40,000. F) Big Bears approximate cash flow would decrease by $40,000.
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