Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The pretax operating cash flow of Carla Vista Motors declined so much during the recession of 2008 and 2009 that the company almost defaulted on

The pretax operating cash flow of Carla Vista Motors declined so much during the recession of 2008 and 2009 that the company almost defaulted on its debt. The owner of the company wants to change the cost structure of his business so that this does not happen again. He has been able to reduce fixed costs from $480,000 to $319,000 and, in doing so, reduce the Cash Flow DOL for Carla Vista Motors from 3.0 to 2.4 with sales of $1,080,000 and pretax operating cash flow of $280,000. If sales declined by 20 percent from this level, how much more pretax operating cash flow would Carla Vista Motors have with the new cost structure than under the old? (Round answer to nearest whole dollar, e.g. 5,275.)

Carla Vista Motors would have $

more pretax operating cash flow with the new cost structure than under the old.

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_2

Step: 3

blur-text-image_3

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

The Future Of Audit Keeping Capital Markets Efficient

Authors: Keith Houghton, Christine Jubb, Michael Kend, Juliana Ng

1st Edition

1921666501, 978-1921666506

More Books

Students also viewed these Accounting questions

Question

What is management growth? What are its factors

Answered: 1 week ago