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amid [387]
3 years ago
9

Amsted, Inc. is considering a project that will increase revenues by $2.5 million, cash operating expenses by $700,000, and depr

eciation and amortization by $300,000 during 2011. For this project, the firm will purchase $800,000 of equipment during the year while decreasing its inventory by $200,000 (with no corresponding decrease in current liabilities). The marginal tax rate for Amsted is 35 percent. What is this project’s incremental after-tax free cash flow for 2011
Business
1 answer:
sergij07 [2.7K]3 years ago
5 0

Answer:

incremental after tax cash flow for 2011: $1,145,000

Explanation:

Additional revenue                                                 $2,500,000

Cash operating expenses                                       ($700,000)

Depreciation and amortization expenses               ($300,000)

<u>Reduced inventories                                               ($200,000)</u>

Pretax income                                                         $1,300,000

<u>Less taxes 35%                                                        ($455,000)</u>

Net income                                                                $845,000

<u>Add Depreciation and amort. expenses                  $300,000</u>

Free cash flow                                                           $1,145,000

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2 years ago
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5 0
3 years ago
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2 years ago
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