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Suppose a firms tax rate is 35%. a. What effect would a $10.23 million operating expense have on this years eanings? What effect would it have on next years earnings? b. What effect would an $11.75 million capital expense have on this years earnings if the capital is depreciated at a rate of $2.35 million per year for five years? What effect would it have on next years eamings? a. What effect would a $10.23 million operating expense have on this years earnings? Earnings would increase (decline) by $million. (Round to two decimal places, and use a negative number for a decline.)

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Home nert Page Layout Formulas Data Review View dd-Ins Cut E AutoSum Wrap Text aCopy в 1 프 . Ej-., Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 C Conditional Format CeInsert Delete Format Formatting as Table Styles2 Clear Sort &Find & Format Painter Clipboard Alignment Number Cells Editing DB47 Formula Bar CV CX CY cZ DA DB DC DE DF 30 31 32 OPERATING EXPENSES 10.23 MILLION TAX RATE AFTER TAX OPERATING EXPENSES 10.23 (1-0.35)- 35% 6.65 34 35 36 37 38 39 40 EARNINGS WOULD INCREASE(DECLINE) BY 6.65 MILLION ANS IT IS A CURRENT YEAR EXPENSE SO IT WILL NOT HAVE ANY EFFECT ON NEXT YEAR EARNINGS CAPITAL EXPENDITURE 11.75 MILLION IT HAS NOT EFFECT ON EARNINGS DIRECTLY BUT WE WILL HAVE DEPRECIATION OF 2.35 MILLION FOR EACH OF NEXT 5 YEARS AS DEPRECATION WILL BE SHOWN AS OPERATING EXPENSES AFTER TAX OPERATING EXPENSES 2.35*(1-0.35) 42 43 1.53 45 46 47 48 4FIFOCASH BUDGET ANSEARNINGS WOULD INCREASE(DECLINE) BY 1.53 MILLION FOR EACH OF NEXT 5 YEARS 45 BV MV rato VARIANCE BEP, OL FLratios B-S t loss SALES BUDGET DIFF ANALYSIS overheadfloat erences: EV23 13:27 31-01-2019

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