Butterfly Tractors sold $17.00 million last year. The cost of goods sold was $8.60 million, the depreciation
Question:
Butterfly Tractors sold $17.00 million last year. The cost of goods sold was $8.60 million, the depreciation expense was $2.60 million, the interest payment on outstanding debt was $1.60 million, and the firm's tax rate was 35%.
a. What was the firm's net income and net cash flow?
b. What happens to net income and cash flow if depreciation is increased by $1.60 million?
c. Would you expect the change in income and cash flow to have a positive or negative effect on the firm's stock price?
d. $1.60 million in depreciation and interest expense 2, What would be the impact on net income if it were $60 million?
e. What would be the effect on cash if depreciation was $1.60 million and interest expense was $2.60 million?
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus