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(solution) A project currently generates sales of $10.4 million, variable


A project currently generates sales of $10.4 million, variable costs equal to 50% of sales, and fixed costs of $2.2 million. The firm?s tax rate is 30%.

  1. What are the effects on the after-tax profits and cash flow, if sales increase from $10.4 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 (Click to select) decreased/increased by $ million.
  • Cash flow (Click to select) increased/ decreased by $ million.
  1. What are the effects on the after-tax profits and cash flow, if variable costs increase to 60% 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 (Click to select) decreased/increased by $ million.
  • Cash flow (Click to select) increased/ decreased by $ million.

 


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Sep 13, 2020

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