Purchase Solution

# Incremental analysis: After tax profits with changed sales

Not what you're looking for?

A project currently generates sales of \$10.5 million, variable costs equal to 60% of sales, and fixed costs of \$2 million. The firm's tax rate is 40%.

a. What are the effects on the after-tax profits and cash flow, if sales increase from \$10.5 million to \$11.8 million. (Input all amounts as positive values. Do not round intermediate calculations. Enter your answers in millions rounded to 3 decimal places.)

After-tax profit select (decreased or increased) by \$__________ million.
Cash flow select (decreased or increased) by \$___________ million.

b. What are the effects on the after-tax profits and cash flow, if variable costs increase to 70% of sales. (Input all amounts as positive values. Do not round intermediate calculations. Enter your answers in millions rounded to 3 decimal places.)

After-tax profit select (decreased or increased) by \$___________ million.
Cash flow select (decreased or increased) by \$___________ million.

##### Solution Summary

Your analysis is in excel, attached. The after tax profits is shown. Instructional comments about cash flows are given but no computation.

Solution provided by:
###### Education
• BSc, University of Virginia
• MSc, University of Virginia
• PhD, Georgia State University
###### Recent Feedback
• "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
• "Thank, this is more clear to me now."
• "Awesome job! "
• "ty"
• "Great Analysis, thank you so much"

##### Free BrainMass Quizzes

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

##### Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

##### Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.