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Details regarding cash flows

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The Rogers Corporation has a gross profit of $880,000 and $360,000 in deprecation expense. The Evans Corporation also has $880,000 in gross profit, with $60,000 in depreciation expense. Selling and administrative expense is $120,000 for each company.

Given the tax rate is 40 percent, compute the cash flow for both companies. Explain the difference in cash flow between the two firms.

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Solution Summary

The solution explains how to compute the cash flows for the firm. The differences in cash flow between the two firms are determined.

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Cash flow = Net Income + Depreciation

We calculate the net income for each company

Rogers corporation

Gross Profit = 880,000
Depreciation Expense 360,000
SGA expense 120,000
Income before tax = 400,000
Tax (40%) = 160,000
Net ...

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