Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Butterfly Tractors had $21.00 million in sales last year. Cost of goods sold was $9.40 million, depreciation expense was $3.40 million, interest payment on

image text in transcribed

Butterfly Tractors had $21.00 million in sales last year. Cost of goods sold was $9.40 million, depreciation expense was $3.40 million, interest payment on outstanding debt was $2.40 million, and the firm's tax rate was 21%. a. What was the firm's net income? Note: Enter your answer in millions rounded to 2 decimal places. b. What was the firm's cash flow? Note: Enter your answer in millions rounded to 2 decimal places. c. What would happen to net income and cash flow if depreciation were increased by $2.40 million? Note: Enter your numeric answers in millions rounded to 2 decimal places. Select "unaffected" if the results do not affect the balance. d. Would you expect the change in depreciation to have a positive or negative impact on the firm's stock price? e. What would be the impact on net income if depreciation was $2.40 million and interest expense was $3.40 million? f. What would be the impact on cash flow if depreciation was $2.40 million and interest expense was $3.40 million? Note: Enter your numeric answer in millions rounded to 2 decimal places. Select "unaffected" if the results do not affect the balance. Answer is not complete. a. Net income $ 4.58 million b. Net cash flow $ 7.98 million c. Net income would be c. Cash flow would be d. Impact on stock price e. Impact on net income f. Cash flow would be decreased increased Positive by $ 1.90 million by 0.50 million would not change decreased by million

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Public Finance and Public Policy

Authors: Jonathan Gruber

4th edition

1429278455, 978-1429278454

More Books

Students also viewed these Finance questions