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Butterfly Tractors had $21.50 million in sales last year. Cost of goods sold was $9.50 million,...

Butterfly Tractors had $21.50 million in sales last year. Cost of goods sold was $9.50 million, depreciation expense was $3.50 million, interest payment on outstanding debt was $2.50 million, and the firm’s tax rate was 30%.

a. What was the firm’s net income and net cash flow? (Enter your answers in millions rounded to 2 decimal places. For example, for $3.92 million, enter "3.92", not "3920000") Net income $ million Net cash flow $ million

b. What would happen to net income and cash flow if depreciation were increased by $2.50 million? (Input all amounts as positive values. Enter your answers in millions rounded to 2 decimal places. For example, for $3.92 million, enter "3.92", not "3920000") Net income by $ million Cash flow by $ million

d. What would be the impact on net income and cash flow if the firm’s interest expense were $2.50 million higher. (Input all amounts as positive values.

Solutions

Expert Solution

Answer a.

Answer b.

Change in Net Income = $2.45 million - $4.20 million
Change in Net Income = -$1.75 million

Change in Net Cash Flow = $8.45 million - $7.70 million
Change in Net Cash Flow = $0.75 million

Net income decreases by $1.75 million and net cash flow increases by $0.75 million.

Answer d.

Change in Net Income = $2.45 million - $4.20 million
Change in Net Income = -$1.75 million

Change in Net Cash Flow = $5.95 million - $7.70 million
Change in Net Cash Flow = -$1.75 million

Net income decreases by $1.75 million and net cash flow decreases by $1.75 million.

jeff jeffy answered 8 months ago
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