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.

1. 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.

2. 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.

Income and Cash Flow Analysis Cash sales Costs other than depreciation as % of sales Depreciation Federal plus state tax rate Interest $10,000,000 70.00% $1,500,000 40.00% $0 Formulas $10,000,000 #N/A 1,500,000 Income Statement: Sales Costs except depreciation Depreciation Earnings before interest and taxes (EBIT) Interest Pre-tax earnings Taxes Net income #N/A 0 $0 #N/A #N/A #N/A Net Cash Flow: Net income Depreciation Net cash flow 1,500,000 #N/A Original Depreciation Doubled $3,000,000 $10,000,000 #N/A 3,000,000 Income Statement: Sales Costs except depreciation Depreciation Earnings before interest and taxes (EBIT) Interest Pre-tax earnings Taxes Net income #N/A SO #N/A #N/A #N/A Net Cash Flow: Net income Depreciation Net cash flow 3,000,000 #N/A Original Depreciation Halved $750,000 $10,000,000 #N/A 750,000 Income Statement: Sales Costs except depreciation Depreciation Earnings before interest and taxes (EBIT) Interest Pre-tax earnings Taxes Net income #N/A SO #N/A #N/A #N/A Net Cash Flow: Net income Depreciation Net cash flow 750,000 #N/A Would you prefer depreciation to be doubled or halved? #N/A