Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Berndt Corporation expects to have sales of $ 1 1 million. Costs other than depreciation are expected to be 8 0 % of sales,

The Berndt Corporation expects to have sales of $11 million. Costs other than depreciation are expected to be 80% of sales, and depreciation is expected to be $1.1 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Brendt's federal-plus-state tax rate is 40%. Berndt has no debt. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.
a. Set up an income statement. What is Berndt's expected net cash flow? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.
b. Suppose Congress changed the tax laws so that Berndt's depreciation expenses doubled. No changes in operations occurred. What is Berndt's expected net cash flow? Round your answer to the nearest dollar.
c. Now suppose that Congress changed the tax laws such that, instead of doubling Berndts depreciation, it was reduced by 50%. What is Berndt's expected net cash flow? Round your answer to the nearest dollar.
d. If this were your company, would you prefer Congress to cause your depreciation expense to be doubled or halved?
image text in transcribed

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

Finance Your Business Secure Funding To Start Run And Grow Your Business

Authors: The Staff Of Entrepreneur Media

1st Edition

1599185970, 978-1599185972

More Books

Students also viewed these Finance questions

Question

What is operatiing system?

Answered: 1 week ago