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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 Preview

    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 ...

    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.