Question

Income and Cash Flow Analysis

The Berndt Corporation expects to have sales of $12 million. Costs other than depreciation are expected to be 70% of sales, and depreciation is expected to be $1.8 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Brendt's federal-plus-state tax rate is 40%. Berndt has no debt.

Set up an income statement. What is Berndt's expected net income? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000.
$  

What is Berndt's expected net cash flow? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000.
$  

Answer 1

Berndt's expected net income

INCOME STATEMENT
Sales	$120,00,000
Less: Costs other than Depreciation [$120,00,000 x 70%]	$84,00,000
Less: Depreciation Expenses	$18,00,000
Earnings Before Tax (EBT)	$18,00,000
Less: Taxes at 40% [$18,00,000 x 40%]	$720,000
Net Income	$10,80,000

“Berndt's expected net income = $10,80,000”

Berndt’s expected net cash flow

Net Cash Flow = Net Income + Depreciation Expenses

= $10,80,000 + $18,00,000

= $28,80,000

“Berndt's expected net cash flow = $28,80,000”