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4 May, 15:46

The Rogers Corporation has a gross profit of $704,000 and $318,000 in depreciation expense. The Evans Corporation also has $704,000 in gross profit, with $44,200 in depreciation expense. Selling and administrative expense is $252,000 for each company.

Given that the tax rate is 40 percent, compute the cash flow for both companies.

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  1. 4 May, 16:07
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    1. The Rogers Corporation:

    The earning of the corporation is: $704,000

    The addition to the cash flow includes:

    +) Depreciation expense: $318,000

    The subtractions to the cash flow includes:

    +) Selling and administrative expense: $252,000

    +) Paying tax: Tax = 40% x Gross profit = 40% x 704,000 = $281,600

    => The total cash flow is: 704,000 + 318,000 - 252,000 - 281,600 = $488,400

    2. The Evans Corporation:

    The earning of the corporation is: $704,000

    The addition to the cash flow includes:

    +) Depreciation expense: $44,200

    The subtractions to the cash flow includes:

    +) Selling and administrative expense: $252,000

    +) Paying tax: Tax = 40% x Gross profit = 40% x 704,000 = $281,600

    => The total cash flow is: 704,000 + 44,200 - 252,000 - 281,600 = $214,600
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