Butterfly Tractors had $23.00 million in sales last year. Cost of goods sold was $9.80 million, depreciation expense was $3.80 million, interest payment on outstanding debt was $2.80 million, and the firm’s tax rate was 21%.What was the firm’s net income?Note: Enter your answer in millions rounded to 2 decimal places.What was the firm’s cash flow?Note: Enter your answer in millions rounded to 2 decimal places. What would happen to net income and cash flow if depreciation were increased by $2.80 million?Note: Enter your numeric answers in millions rounded to 2 decimal places. Select "unaffected" if the results do not affect the balance.Would you expect the change in depreciation to have a positive or negative impact on the firm’s stock price?What would be the impact on net income if depreciation was $1 million and interest expense was $2 million?What would be the impact on cash flow if depreciation was $2.80 million and interest expense was $3.80 million?Note: Enter your numeric answer in millions rounded to 2 decimal places. Select "unaffected" if the results do not affect the balance.

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Answered: Butterfly Tractors had $23.00 million…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Butterfly Tractors had $23.00 million in sales last year. Cost of goods sold was $9.80 million, depreciation expense was $3.80 million, interest payment on outstanding debt was $2.80 million, and the firm’s tax rate was 21%.

What was the firm’s net income?
Note: Enter your answer in millions rounded to 2 decimal places.
What was the firm’s cash flow?
Note: Enter your answer in millions rounded to 2 decimal places.
What would happen to net income and cash flow if depreciation were increased by $2.80 million?
Note: Enter your numeric answers in millions rounded to 2 decimal places. Select "unaffected" if the results do not affect the balance.
Would you expect the change in depreciation to have a positive or negative impact on the firm’s stock price?
What would be the impact on net income if depreciation was $1 million and interest expense was $2 million?
What would be the impact on cash flow if depreciation was $2.80 million and interest expense was $3.80 million?
Note: Enter your numeric answer in millions rounded to 2 decimal places. Select "unaffected" if the results do not affect the balance.

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