Question

6. Given the following, what is the after tax cash flow?

Assume No Cap. Ex and principal payments

Cost of Good 100

Depreciation and Amortization 35

Revenues 150

Selling, General and Admin Exp 5

Tax rate 30%

After tax cash flow =

Use this data for the Next Two Problems

Sales $100.00

COGS 0.2

General and Admin $15.00

Depreciation $35.00

Interest Expense $35.00

Tax Rate 0.25

7. is the company profitable and by how much? (yes or no)

8. does the company produce a positive cash flow or negative? (yes or no and how much?)

Answer 1

(6)

After tax Cash Flow

$42

Explanation:

Revenue	$150
Less: Cost of good sold	($100)
Gross Margin	$50
Less:Depreciation and Amortization	($35)
Less: Selling, General and Admin Exp	($5)
Income before Tax	$10
Tax@ 30%	($3)
Net Income	$7

After Tax Cash Flow= Net Income+ Dep.& Amortization

= $7 + 35

= $42

(7)	is the company profitable and by how much	No	Loss of $5
(8)	does the company produce a positive cash flow or negative	Positive	$30

Explanation :

Sales	$100
Less: COGS ( $100*0.2)	($20)
Gross Income	$80
Less:Depreciation	($35)
Less: General and Admin	($15)
Less: Interest Expense	($35)
Net Loss	($5)

Cash flow= Net loss + Dep.

= ($5) + 35

= $30