accounting
Income versus Cash Flow. Butterfly Tractors had $14 million in sales last year. Cost of goods sold was $8 million, depreciation expense was $2 million, interest payment on outstanding debt was $1 million, and the firm’s tax rate was 21%.
a. What was the firm’s net income?
b. What was the firm’s cash flow?
c. What would happen to net income and cash flow if depreciation were increased by $1 million?
d. Would you expect the change in depreciation to have a positive or negative impact on the firm’s stock price?
e. What would be the impact on net income if depreciation were $1 million and interest expense was $2 million?
f. What would be the impact on cash flow if depreciation were $1 million and interest expense was $2 million?
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