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Wittaler [7]
3 years ago
9

A capital investment project is expected to generate an incremental increase in revenues of $15 million and an incremental incre

ase in operating costs of $10 million during its first year. Year 1 incremental depreciation expense is $5 million. The firm’s interest expense will increase by $2 million during year 1. If the firm’s marginal tax rate is 35% what is the year 1 incremental after-tax cash flow for capital budgeting purposes?
Business
1 answer:
Zinaida [17]3 years ago
6 0

Answer:

$5,000,000

Explanation:

Particulars                                                      Amount

incremental increase in revenues                $15,000,000

- Incremental increase in operating costs    $10,000,000

- Incremental depreciation expense             <u>$5,000,000</u>

Earnings before interest and taxes               $0

Tax ($0 *35%)                                                  <u>$0                    </u>

Operating Income                                           $0

+ Incremental depreciation expense             <u>$5,000,000</u>

After Tax Cash flow for capital budgeting   <u>$5,000,000 </u>

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The chief executive of Norell, an agency that supplies businesses with temporary workers, realizes that the health care industry
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3 years ago
H.T. Tan Company is preparing the annual financial statements dated December 31 of the current year. Ending inventory informatio
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A            50               $15                   $12                           $600 ($12 x 50)

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