Answered step by step
Verified Expert Solution
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 $ million. Costs other than depreciation are expected to be of sales, and depreciation is expected to be $ million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Brendt's federalplusstate tax rate is 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 $ million should be entered as 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 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?
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