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Pio’s Rubber and Plastics, Inc. currently has annual cash revenues of $310,000 and annual operating expenses...

Pio’s Rubber and Plastics, Inc. currently has annual cash revenues of $310,000 and annual operating expenses of $105,000 to include $45,000 in depreciation. The firm’s marginal tax rate is 40 percent. A new extruder can be purchased for $130,000 that will increase revenues by $85,000 per year while operating expenses would increase by $18,000. The investment will increase depreciation by $6,000. Compute Pio’s annual incremental after-tax net cash Pio’s Rubber and Plastics, Inc. currently has annual cash revenues of $310,000 and annual operating expenses of $105,000 to include $45,000 in depreciation. The firm’s marginal tax rate is 40 percent. A new extruder can be purchased for $130,000 that will increase revenues by $85,000 per year while operating expenses would increase by $18,000. The investment will increase depreciation by $6,000. Compute Pio’s annual incremental after-tax net cash $183,600 $42,600 $61,000 Cannot be determined from the information provided $43,800.

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Answer #1
Calculate annual incremental after tax net cash as shown below
Incremental revenue $85,000
Less: Increase in operating expenses $18,000
Less: Increase in depreciation $6,000
Increase in net income before taxes $61,000
Less: Taxes @ 40% $24,400
Net income $36,600
Add: Increase in depreciation $6,000
Annual incremental after tax net cash $42,600
Thus, annual incremental after tax net cash is $42,600
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