During its last financial auditing releases, Mowana Co. reported $363,780 of sales and $168,445 of operating costs excluding depreciation which was accounted for $37,120. As for the company's bonds outstanding they recorded a total of $63,500 carrying 5.72% interest rate compounded annually. During prior year, they carried out expenditures, necessary for it to sustain operations and generate future sales and cash flows, on fixed assets of $88,700 while operating with a net working capital of $31,214. Unlike its pervious year the company's data will keep its steady recording except for the depreciation changing by an increase of $3,740. Thus, assuming the company uses the same depreciation for tax and stockholder reporting purposes, by how much will the depreciation change cause (1) the firm's net income and (2) its free cash flow to change? Tax rate is 30%?



The owner of "ABC Co" insisted that he wants to see a net income of $4,000,000, at least. He was informed that to do so, operating costs (excluding depreciation and amortization) should remain at 50 percent of sales. Also, depreciation and amortization, interest expense, and the company's tax rate, which is 40 percent, will remain the same even if sales change. The task that should be done is a better job in marketing the sale of the company's products. What level of sales would ABC Co have to obtain to generate $4,000,000 in net income? The owner was shocked with the most recent Net Income achieved by his company.

Answer rating: 100% (QA)

For Mowana Co The operating costs excluding depreciation are 168445 Depreciation is 37120 3740 40860 ... View the full answer