Your corporate revenue was up this year to an all-time high of $77,000,000. The company purchased a new capital asset costing $11,000,000. The company had total depreciation expenses (including the new asset) of $7,500,000. The cost of revenue (i.e. raw materials & labor) was $46,300,000, and the O&M expenses were an additional $17,000,000. Using the Pre-2018 tax brackets shown below, compute the Pre-2018 corporate income taxes and the current income taxes owed (post 2018 – flat 21% rate) to determine how much the current tax plan saves the company compared to the pre-2018 brackets. Taxable Income (X) $0-$50,000 50,001-75,000 75,001-100,000 100,001-335,000 335,001-10,000,000 10,000,001-15,000,000 15,000,001-18,333,333 18,333,334 and up a. $868,000 b. $806,000 c. $1,302,000 d. $2,108,000 Tax Rate 15% 25% 34% 34% + 5% 34% 35% 35% +3% 35% Tax Computation Formula $0+ 0.15X 7,500+ 0.25(X $50,000) 13,750 + 0.34(X – 75,000) 22,250+ 0.39(X - 100,000) 113,900 + 0.34(X - 335,000) 3,400,000+ 0.35(X - 10,000,000) 5,150,000+ 0.38(X - 15,000,000) 6,416,666 + 0.35(X – 18,333,333)

Your corporate revenue was up this year to an all-time high of $77,000,000. The company purchased a new capital asset costing $11,000,000. The company had total depreciation expenses (including the new asset) of $7,500,000. The cost of revenue (i.e. raw materials & labor) was $46,300,000, and the O&M expenses were an additional $17,000,000. Using the Pre-2018 tax brackets shown below, compute the Pre-2018 corporate income taxes and the current income taxes owed (post 2018 – flat 21% rate) to determine how much the current tax plan saves the company compared to the pre-2018 brackets. Taxable Income (X) $0-$50,000 50,001-75,000 75,001-100,000 100,001-335,000 335,001-10,000,000 10,000,001-15,000,000 15,000,001-18,333,333 18,333,334 and up a. $868,000 b. $806,000 c. $1,302,000 d. $2,108,000 Tax Rate 15% 25% 34% 34% + 5% 34% 35% 35% +3% 35% Tax Computation Formula $0+ 0.15X 7,500+ 0.25(X $50,000) 13,750 + 0.34(X – 75,000) 22,250+ 0.39(X - 100,000) 113,900 + 0.34(X - 335,000) 3,400,000+ 0.35(X - 10,000,000) 5,150,000+ 0.38(X - 15,000,000) 6,416,666 + 0.35(X – 18,333,333)

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter2: Financial Statements, Cash Flow, And Taxes

Section: Chapter Questions

Problem 1STP

See similar textbooks

Similar questions

Show Publishing recently reported $13,000 of sales, $5,500 of operating costs other than depreciation, and $1,250 of depreciation. The company had $3,500 of bonds with a 6.25% interest rate, and its federal-plus-state income tax rate was 21%. During the year, the firm had expenditures on fixed assets and net operating working capital that totaled $1,550. These expenditures were necessary to sustain operations and generate future sales and cash flows. What was its free cash flow? Also, what does free cash flow mean to a company?
Shrives Publishing recently reported $11,500 of sales, $5,500 of operating costs other than depreciation, and $1,250 of depreciation. The company had $3,500 of bonds that carry a 6.25% interest rate, and its federal-plus-state income tax rate was 25%. During the year, the firm had expenditures on fixed assets and net operating working capital that totaled $1,550. These expenditures were necessary for it to sustain operations and generate future sales and cash flows. What was its free cash flow?
Shrives Publishing recently reported $11,500 of sales, $5,500 of operating costs other than depreciation, and $1,250 of depreciation. The company had $3,500 of bonds that carry a 6.25% interest rate, and its federal-plus-state income tax rate was 25%. During the year, the firm had expenditures on fixed assets and net operating working capital that totaled $1,550. These expenditures were necessary for it to sustain operations and generate future sales and cash flows. What was its free cash flow? a. $4,450.00 b. $2,012.50 c. $3,262.50 d. $4,812.50 e. $6,362.50
Last year Rattner Robotics had $5 million in operatingincome (EBIT). Its depreciation expense was $1 million, its interest expense was $1 million,and its corporate tax rate was 40%. At year-end, it had $14 million in operating currentassets, $3 million in accounts payable, $1 million in accruals, $2 million in notes payable,and $15 million in net plant and equipment. Assume Rattner has no excess cash. Rattneruses only debt and common equity to fund its operations. (In other words, Rattner has nopreferred stock on its balance sheet.) Rattner had no other current liabilities. Assume thatRattner’s only noncash item was depreciation.a. What was the company’s net income?b. What was its net operating working capital (NOWC)?c. What was its net working capital (NWC)?d. Rattner had $12 million in net plant and equipment the prior year. Its net operatingworking capital has remained constant over time. What is the company’s free cashflow (FCF) for the year that just ended?e. Rattner has 500,000…
Last year, Roswin Robotics have $5,000,000.00 in operating income (EBIT). Its depreciation expense was $1,000,000.00, its interest expense was $1,000,000.00 and its corporate tax rate was 40%. At year-end, it had $14,000,000.00 in current assets, $3,000,000.00 in accounts payable, $1,000,000.00 in accruals, $2,000,000.00 in notes payable and $15,000,000.00 in net PPE. Roswin had no other current liabilities. Assume that Roswin's only non-cash item was depreciation. Compute for the following: 1. Net Income 2. Net Operating Working Capital (NOWC) 3. Net Working Capital (NWC)
Last year, Stewart-Stern Inc. reported $11,250 of sales, $4,500 of operating costs other than depreciation, and $1,250 of depreciation. The company had $2,500 of bonds outstanding that carry a 7.00% interest rate, and its federal-plus-state income tax rate was 25.00%. During last year, the firm had expenditures on fixed assets and net operating working capital that totaled $1,600. These expenditures were necessary for it to sustain operations and generate future sales and cash flows. This year's data are expected to remain unchanged except for one item, depreciation, which is expected to increase by $900. By how much will the depreciation change cause (1) the firm's net income and (2) its free cash flow to change? Note that the company uses the same depreciation for tax and stockholder reporting purposes. Do not round the intermediate calculations
4. Last year Rattner Robotics had $5 million in operating income (EBIT). Its depreciationexpense was $1 million, its interest expense was $1 million, and its corporate tax rate was40%. At year-end, it had $14 million in current assets, $3 million in accounts payable, $1million in accruals, and $15 million in net plant and equipment. Assume that Rattner’s onlynoncash item was depreciation. a. What was the company’s net income?b. What was its net working capital (NWC)?c. Rattner had $12 million in net plant and equipment the prior year. Its net workingcapital has remained constant over time. What is the company’s free cash flow (FCF) forthe year that just ended?d. If the firm had $4.5 million in retained earnings at the beginning of the year and paidout total dividends of $1.2 million, what was its retained earnings at the end of the year?Assume that all dividends declared were actually paid.
Company DotThrive reported the following financial results. Operating income is $94.98 million and depreciation and amortization is $6.12 million. The company spent $13.99 million buying new equipment and sold $3.58 million old equipment (this is the after-tax salvage). Net working capital increased by $1.31 million from previous year. The company's tax bracket is 21%. What's the company's Free Cash Flow (FCF) for the year?
GQ recently reported (in millions) $8,250 of sales, $5,750 of operating costs other than depreciation, and $850 of depreciation. The company had $3,200 of outstanding bonds that carry a 5% interest rate, and its federal-plus-state income tax rate was 25%. In order to sustain its operations and thus generate future sales and cash flows, the firm was required to make $1,250 of capital expenditures on new fixed assets and to invest $300 in net operating working capital. By how much did the firm's net income exceed its free cash flow? Do not round the intermediate calculations.
Company DotThrive reported the following financial results. Operating income is $61.32 million and depreciation and amortization is $6.84 million. The company spent $11.69 million buying new equipment and sold $4.50 million old equipment (this is the after-tax salvage). Net working capital increased by $2.63 million from previous year. The company's tax bracket is 21%. What's the company's Free Cash Flow (FCF) for the year? Note: the unit of your answer should be in millions of dollars, with 2 decimal points.
Last year, Sally's Studio added $2,300 to retained earnings from sales of $66,800. The company had costs of $52,300, dividends of $1,000, and interest paid of $900. The tax rate was 34 percent. What was the amount of the depreciation expense? $8,600 $4,200 $14,500 $9,500 $6,800
Delta Products recently reported $4,250,000 of sales, $3,200,000 of operating costs other than depreciation, and $250,000 of depreciation. The company had $750,000 of outstanding bonds that carry a 4.25% interest rate, and its federal-plus-state income tax rate was 35%. In order to sustain its operations and thus generate sales and cash flows in the future, the Delta Products spent $350,000 to buy new fixed assets and to invest $75,000 in net operating working capital. How much free cash flow did Delta Products generate?