Question
The Berndt Corporation expects to have sales of $10 million. Costs other than depreciation are expected to be 70% of sales, and depreciation is expected
The Berndt Corporation expects to have sales of $10 million. Costs other than depreciation are expected to be 70% of sales, and depreciation is expected to be $1.5 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.
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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.
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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.
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