EBK FINANCIAL MANAGEMENT: THEORY & PRAC
15th Edition
ISBN: 9781305886902
Author: EHRHARDT
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 2, Problem 10P
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To determine: The company’s net income and its net cash flow.
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The Klaven Corporation has operating income (EBIT) of $750,000.
The company’s depreciation expense is $200,000. Klaven is 100 percent equity financed, and it faces a 40 percent tax rate. Assume that the firm has no amortization expense. What are its net income, its net cash flow, and its operating cash flow?
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National Co.’ operating income (EBIT) is P500,000. The company’s tax rate is 25 percent, and its operating cash flow is P230,000. The company’s interest expense is P100,000. What is the company’s net cash flow? (Assume that depreciation is the only non-cash item in the firm’s financial statements.)
Chapter 2 Solutions
EBK FINANCIAL MANAGEMENT: THEORY & PRAC
Ch. 2 - Define each of the following terms:
Annual report;...Ch. 2 - Prob. 2QCh. 2 - If a typical firm reports 20 million of retained...Ch. 2 - What is operating capital, and why is it...Ch. 2 - Prob. 6QCh. 2 - Prob. 7QCh. 2 - Prob. 8QCh. 2 - Prob. 1PCh. 2 - Prob. 2PCh. 2 - Prob. 3P
Ch. 2 - Prob. 4PCh. 2 - Kendall Corners Inc. recently reported net income...Ch. 2 - In its most recent financial statements,...Ch. 2 - Prob. 7PCh. 2 - Prob. 8PCh. 2 - Prob. 9PCh. 2 - Prob. 10PCh. 2 - Prob. 11PCh. 2 - Prob. 12PCh. 2 - Prob. 1MCCh. 2 - Prob. 2MCCh. 2 - Prob. 3MCCh. 2 - Prob. 4MCCh. 2 - Prob. 5MCCh. 2 - Prob. 6MCCh. 2 - Prob. 7MCCh. 2 - Prob. 8MCCh. 2 - Prob. 9MCCh. 2 - Prob. 10MC
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- The Moore Corporation has operating income (EBIT) of 750,000. The companys depreciation expense is 200,000. Moore is 100% equity financed, and it faces a 40% tax rate. What is the companys net income? What is its net cash flow?arrow_forwardThe Berndt Corporation expects to have sales of 12 million. Costs other than depreciation are expected to be 75% of sales, and depreciation is expected to be 1.5 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Berndts federal-plus-state tax rate is 40%. Berndt has no debt. a. Set up an income statement. What is Berndts expected net income? Its expected net cash flow? b. Suppose Congress changed the tax laws so that Berndts depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow? c. Now suppose that Congress changed the tax laws such that, instead of doubling Berndts depreciation, it was reduced by 50%. How would profit and net cash flow be affected? d. If this were your company, would you prefer Congress to cause your depreciation expense to be doubled or halved? Why?arrow_forwardA company has $600,000 in Sales, $400,000 in Costs, and $100,000 in Depreciation expenses. If the corporate tax rate is 20%, then what is the Operating Cash Flow (OCF)?arrow_forward
- WayneCorp, Inc., has sales of $581, 000, costs of $244, 000, depreciation expense of $36,000, interest expense of $18,000, and a tax rate of 32 percent. (Do not include the dollar sign ($).) What is this firm's net income?arrow_forwardhas total sales of $1,500,000 and costs of $993,500. Depreciation is $60,000 and the tax rate is 21 percent. The firm does not have any interest expense. What is the operating cash flow?arrow_forwardPlease help mearrow_forward
- The Moore Enterprise has gross profit of $1,140,000 with amortization expense of $490,000. The Kipling Corporation has $1,140,000 in gross profits but only $73,000 in amortization expense. The selling and administration expenses are $133,000; the same for each company. If the tax rate is 40 percent, calculate the cash flow for each company. Moore Kipling Cash flow $ $ Calculate the difference in cash flow between the two firms? Difference in cash flow $arrow_forwardNataro, Incorporated, has sales of $666, 000, costs of $336, 000, depreciation expense of $ 81,000, interest expense of $46,000, and a tax rate of 23 percent. What is the net income for this firm?arrow_forwardAurora Lighting Ltd has the following income statement items: sales of $12 000 000; cost of goods sold of $4 000 000; other operating expenses of $1 500 000; and interest expense of $50 000. Calculate gross profit margin of the company? Calculate earnings before interest and tax (EBIT) of the company? Calculate net income of the company given the company’s marginal tax rate of 25%? What are the three important questions of corporate finance? Briefly describe and relate them to the balance sheet of a company.arrow_forward
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