Question 22

AOS Industries Statement of Cash Flows for 2008

Cash from operating activities: 3.1

Cash from investing activities: -2.6

Cash from financing activities: 5.7

Change in Cash and Cash Equivalents: 6.2

Consider the above statement of cash flows. In 2008, AOS Industries had contemplated buying a new warehouse for $3 million, the cost of which would be depreciated over 10 years, straight-line. If AOS Industries has a tax rate of 25%, what would be the impact for the amount of cash held by AOS at the end of the 2008?

It would have $2,925,000 less cash at the end of 2008

It would have an additional $7,500,000 in cash at the end of 2008

It would have $3,000,000 less cash at the end of 2008

It would have $1,500,000 less cash at the end of 2008