The Rogers Corporation has a gross profit of $704,000 and $318,000 in depreciation expense. The Evans Corporation also has $704,000 in gross profit, with $44,200 in depreciation expense. Selling and administrative expense is $252,000 for each company.
Given that the tax rate is 40 percent, compute the cash flow for both companies.

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cecepham cecepham · Answer 1 · 2020-04-03T19:34:57+02:00

Answer:

1. The Rogers Corporation:

The earning of the corporation is: $704,000

The addition to the cash flow includes:

+) Depreciation expense: $318,000

The subtractions to the cash flow includes:

+) Selling and administrative expense: $252,000

+) Paying tax: Tax = 40% x Gross profit = 40% x 704,000 = $281,600

=> The total cash flow is: 704,000 + 318,000 - 252,000 - 281,600 = $488,400

2. The Evans Corporation:

The earning of the corporation is: $704,000

The addition to the cash flow includes:

+) Depreciation expense: $44,200

The subtractions to the cash flow includes:

+) Selling and administrative expense: $252,000

+) Paying tax: Tax = 40% x Gross profit = 40% x 704,000 = $281,600

=> The total cash flow is: 704,000 + 44,200 - 252,000 - 281,600 = $214,600