Butterfly Tractors had $14 million in sales last year. Cost of goods sold was $8 million, depreciation expense was $2 million, interest payment on outstanding debt was $1 million, and the firm's tax rate was 35%.
a. What were the firm's net income and net cash flow?
b. What would happen to net income and cash flow if depreciation were increased by $1 million?
c. Would you expect the change in income and cash flow to have a positive or negative impact on the firm's stock price?
d. What would be the impact on net income if depreciation was $ 1 million and interest expense was $2 million?
e. What would be the impact on cash if depreciation was $1 million and interest expense was $2 million?