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 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 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?
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 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 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?
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
Related questions
Question
Transcribed Image Text:1 Income and Cash Flow Analysis
3 Cash sales
4 Costs other than depreciation as % of sales
5
Depreciation
6 Federal plus state tax rate
7
Interest
8
9 Income Statement.
10 Sales
11 Costs except depreciation
12 Depreciation
13 Eamings before interest and taxes (EBIT)
14 Interest
15 Pre-tax earnings
16 Taxes
17
18
Net income
19
20 Net income
21 Depreciation
22 Net cash flow
23
Net Cash Flow
24 Original Depreciation Doubled
25
Show Transcribed Text
26 Income Statement
27 Sales
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
28 Costs except depreciation
29 Depreciation
30 Earnings before interest and taxes (EBIT)
41 Original Depreciation Halved
42
43 Income Statement
44 Sales
45 Costs except depreciation
46 Depreciation
Show Transcribed Text
Original Depreciation Halved
47 Earnings before interest and taxes (EBIT)
48 Interest
49 Pre-tax earnings
50 Taxes
51 Net income
Income Statement
Sales
Costs except depreciation
Depreciation
Earnings before interest and taxes (EBIT)
Interest
Pre-tax earnings
Taxes
Net income
Net Cash Flow:
Net income
Depreciation
Net cash flow
$15,000,000
80.00%
$1,500,000
40.00%
$0
Would you prefer depreciation to be
doubled or halved?
$15,000,000
Show Transcribed Text
1,500,000
0
SO
$3,000,000
1.500.000
F
$15,000,000
3,000,000
0
$0
3,000,000
$750,000
$15.000.000
750,000
0
$0
$750,000
$15,000,000
750,000
0
$0
750,000
Formulas
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Transcribed Image Text: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 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
THAAL
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.
$
d. If this were your company, would you prefer Congress to cause your depreciation expense to be doubled or halved?
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