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The Rogers Corporation has a gross profit of $784,000 and $314,000 in depreciation expense. The Evans Corporation also has $784,000 in gross profit, with $48,900 in depreciation expense. Selling and administrative expense is $200,000 for each company.

Required:
a. Given that the tax rate is 40 percent, compute the cash flow for both companies.
b. Calculate the difference in cash flow between the two firms.

Respuesta :

Tundexi

Answer:

Particulars                                        Rogers           Evans

Gross profit                                     784,000        784,000

(-) Selling and admin expenses     (200,000)     (200,000)

(-) Depreciation                               (314,000)       (48,900)

EBT                                                   270,000       535,100

(-) Taxes at 40%                              (108,000)       (214,040)

EAT                                                   162,000        321,060

(+) Depreciation                                314,000        48,900

Cash flows                                        476,000       369,960

Difference in cash flows = $476,000 - $369,960

Difference in cash flows = $ 106,040

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