Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Mainline Clinic, a for-profit business, had revenues of $12.7 million last year. Expenses other than depreciation totaled 67 percent of revenues, and depreciation expense was

Mainline Clinic, a for-profit business, had revenues of $12.7 million last year. Expenses other than depreciation totaled 67 percent of revenues, and depreciation expense was $2.5 million. All revenues were collected in cash during the year, and all expenses other than depreciation were paid in cash. Mainline must pay taxes at a rate of 39 percent of pretax (operating) income. Now, suppose the company changed its depreciation calculation procedures (still within GAAP) such that its depreciation expense was halved. How would this change affect Mainline's cash flow? If cash flow would go down, enter the amount of the change as a negative number. If cash flow would go up, enter the amount of the change as a positive number.

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

Research In Finance

Authors: John W. Kensinger

1st Edition

0857245414, 978-0857245410

More Books

Students also viewed these Finance questions