Question
Mainline Clinic, a for-profit business, had revenues of $13.4 million last year. Expenses other than depreciation totaled 63 percent of revenues, and depreciation expense was
Mainline Clinic, a for-profit business, had revenues of $13.4 million last year. Expenses other than depreciation totaled 63 percent of revenues, and depreciation expense was $2.9 million. All revenues were collected in cash during the year, and all expenses other than depreciation were paid in cash. Mainline must pay taxes at a rate of 38 percent of pretax (operating) income.
Now, suppose the company changed its depreciation calculation procedures (still within GAAP) such that its depreciation expense doubled. How would this change affect Mainlines net income? If net income would go down, enter the amount of the change as a negative number. If net income would go up, enter the amount of the change as a positive number.
Enter your answer in millions of dollars, rounded to one decimal place. Do not enter the "$" sign. For example, enter $12.34 million as 12.3. If the answer is negative, place a minus sign (-) before the answer.
DO NOT ROUND ANYTHING UNTIL THE VERY END OR THE ANSWER WILL BE WRONG!!!!!!!!!!!!!!!!!!
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started