The Berndt Corporation expects to have sales of $15 million. Costs other than depreciation are expected to be 80% 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 35%. 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. HIHI Open spreadsheet 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 Berndt's depreciation, it was reduced by 50%. What Is Berndt's expected net cash flow? Round your answer to the nearest dollar $ c D E G 1 Income and Cash Flow Analysis 2 3 Cash sales 4 Costs other than depreciation as % of sales 5 Depreciation Federal plus state tax rate Interest $15,000,000 80.00% $1,500,000 35.00% SO Formulas $15.000.000 #N/A 1.500.000 #N/A 0 $0 Income Statement: 10 Sales 11 Costs except depreciation 12 Depreciation 13 Earnings before interest and taxes (EBIT) 14 Interest 15 Pre-tax earnings 16 Taxes 17 Net Income 18 19 Net Cash Flow 20 Net income 21 Depreciation Net cash flow #N/A #N/A WNIA 1.600.000 UNIA $3.000.000 24 Original Depreciation Doubled 25 26 Income Statement 27 Sales Costs except depreciation $15.000.000 WNIA B D E $3,000,000 $16,000,000 #N/A 3,000,000 #NIA 0 24 Original Depreciation Doubled 25 26 Income Statement: 27 Sales 28 Costs except depreciation 29 Depreciation 30 Earnings before interest and taxes (EBIT) 31 Interest 32 Pre-tax earnings 33 Taxes 34 Net income 35 36 Net Cash Flow: 37 Net income 38 Depreciation 39 Net cash flow 40 41 Original Depreciation Halved SO #N/A #N/A #N/A 3.000.000 #N/A $750,000 $15.000.000 #N/A 750.000 Income Statement: 44 Sales 45 Costs except depreciation 46 Depreciation 47 Earnings before interest and taxes (EBIT) 48 Interest Pre-tax earnings 50 Taxes 5 Net income #N/A 0 SO #N/A #NA Sheet1 #N/A 750,000 53 Net Cash Flow 54 Net income 55 Depreciation 56 Net cash flow 57 Would you prefer depreciation to be 58 doubled or halved? #N/A #N/A
