Question

McGwire Aerospace expects to have net cash flow of $12 million. The company forecasts that its operating costs excluding depreciation and amortization will equal 75 percent of the company’s sales. Depreciation and amortization expenses are expected to be $5 million and the company has no interest expense. All of McGwire’s sales will be collected in cash, costs other than depreciation and amortization will be paid in cash during the year, and the company’s tax rate is 40 percent. What is the company’s expected sales

Answer 1

Based on the above, the company’s expected sales is said to be $66.67M.

What is the company’s expected sales about?

Note that the said company's expected sales be titled as X.

In the question, The Net cash flow is given. therefore the equation will be:

X - 0.75X = 0.25X

Hence: Sales minus expenses = EBITDA

So, we have to minus depreciation, amortization, interest and tax to get the profit after tax and depreciation and amortization will be added to get the net cash flow.

So:

(0.25X - $5M - (0.25X - $5M) X 0.40) + $5M = $12M

0.15X -$5M - 0.10X + $2M = $7M

and/or  0.15X - 3M = $7M

and/or  X = $10M/0.15

= $66.67M

Hence, Based on the above, the company’s expected sales is said to be $66.67M.

Learn more about depreciation from

brainly.com/question/1203926

#SPJ1