Question

# Income and Cash Flow Analysis The Berndt Corporation expects to have sales of \$12 million. Costs...

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.
\$

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”