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22 November, 16:17

The Rogers Corporation has a gross profit of $746,000 and $305,000 in depreciation expense. The Evans Corporation also has $746,000 in gross profit, with $48,000 in depreciation expense. Selling and administrative expense is $224,000 for each company. Given that the tax rate is 40 percent, compute the cash flow for both companies.

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  1. 22 November, 20:05
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    Net cash flow for The Rogers Corporation: $435,200

    Net cash flow for The Evans Corporation: $332,400

    Explanation:

    For The Rogers Corporation:

    Income before tax = $746,000 - $305,000 - $224,000 = $217,000

    Tax = $217,000 x 40% = $86,800

    Net income afer tax = $217,000 - $86,800 = $130,200

    Net cash flow = Gross profit - Selling and administrative expense - Tax = $746,000 - $224,000 - $86,800 = $435,200

    For The Evans Corporation

    Income before tax = $746,000 - $48,000 - $224,000 = $474,000

    Tax = $474,000 x 40% = $189,600

    Net income afer tax = $474,000 - $189,600 = $284,400

    Net cash flow = $746,000 - $224,000 - $189,600 = $332,400
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