The Berndt Corporation expects to have sales of $12 million. Costs other than depreciation are expected to be 60% of sales, and depreciation is expected to be $2.4 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.
The Berndt Corporation expects to have sales of $12 million. Costs other than depreciation are expected to be 60% of sales, and depreciation is expected to be $2.4 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.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text: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.
$
d. If this were your company, would you prefer Congress to cause your depreciation expense to be doubled or halved?
Transcribed Image Text:The Berndt Corporation expects to have sales of $12 million. Costs other than depreciation are expected to be 60% of sales, and
depreciation is expected to be $2.4 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.
X
Open spreadsheet
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Step 1: Introduction to net cash flows:
VIEWStep 2: Requirement a- Determining expected net cash flow:
VIEWStep 3: Requirement b- Determining expected net cash flow due to doubling of depreciation:
VIEWStep 4: Requirement c- Determining expected net cash flow when depreciation reduced by 50%:
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