Solution: | ||||||||
a) | ||||||||
Sales | $ | 20.5 | ||||||
Less: | Cost of Goods Sold | $ | 9.3 | |||||
Gross Profit | $ | 11.2 | ||||||
Depreciation expense | $ | 3.3 | ||||||
Interest expense | $ | 2.3 | ||||||
Profit before Tax | $ | 5.6 | ||||||
less: | Income Tax @ 30% | $ | 1.68 | |||||
Net Income | $ | 3.92 | ||||||
Net Income = | $3.92 million | |||||||
b) | Firm's Cash Flow | |||||||
Net Income | $ | 3.92 | from a part | |||||
Add: | Depreciation expense | $ | 3.3 | |||||
Net Cash Flow | $ | 7.22 | ||||||
Net Cash Flow | $7.22 Million | |||||||
c) | Sales | $ | 20.5 | |||||
Less: | Cost of Goods Sold | $ | 9.3 | |||||
Gross Profit | $ | 11.2 | ||||||
Depreciation expense | $ | 5.6 | ||||||
Interest expense | $ | 2.3 | ||||||
Profit before Tax | $ | 3.3 | ||||||
less: | Income Tax @ 30% | $ | 0.99 | |||||
Net Income | $ | 2.31 | ||||||
Net Income would be Decreased by | $ | 1.61 | Million | (3.92-2.31) | ||||
Cash Flow would be Increased by | $ | 0.69 | Million | (7.22-7.91) | ||||
Cash Flow: | ||||||||
Net Income | $ | 2.31 | ||||||
Add: | Depreciation expense | $ | 5.6 | |||||
Net Cash Flow | $ | 7.91 | ||||||
f) | Sales | $ | 20.5 | |||||
Less: | Cost of Goods Sold | $ | 9.3 | |||||
Gross Profit | $ | 11.2 | ||||||
Depreciation expense | $ | 2.3 | ||||||
Interest expense | $ | 3.3 | ||||||
Profit before Tax | $ | 5.6 | ||||||
less: | Income Tax @ 30% | $ | 1.68 | |||||
Net Income | $ | 3.92 | ||||||
Cash Flow: | ||||||||
Net Income | $ | 3.92 | ||||||
Add: | Depreciation expense | $ | 2.3 | |||||
Net Cash Flow | 6.22 | |||||||
Cash flow would be decreased by | $ | 1 | (7.22-6.22) | |||||
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