[amaffei]

Colter Corp is conducting an analysis of a potential capital investment. The project expected to increase sales by 100K and reduce costs by 50K. Deprecation expense is 30K per year. Marginal Tax rate is 40%. What is the annual cash flow for this project? Answer is 102K Can someone please help figure out how is it 102K Thanks,

[tkone22]

income of 150,000 * .60 = 90,000

depreciation shield 30,000 * .40 = 12,000

total 102,000

your getting sales of 100, and saving costs of 50 therefore income of 150.

hope this helps

AUD: 02/24/2015: 84!
BEC: 05/22/2015: 77!
REG: 08/28/2015: 85!
FAR: 05/29/2016: 76!

[Anonymous]

Increase in sale is additional cash inflow = 100K

Reduction in cost is also additional cash for the company = 50K

Total cash inflow net of tax= 150* (1-.40) = 90k

Depreciation tax benefit = 30K * .4 = 12k

annual cashflow = 90+12 = 102k

[amaffei]

awesome – thanks guys I have another mcq i cant figure out also I will be posting – hope u can help 🙂

thank u thank u

[Author]

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