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Author Question: Simpson Productions Inc. had net sales of 300,000, costs of sales of 150,000, additional expenses of ... (Read 53 times)

notis

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on: Jul 11, 2018
Simpson Productions Inc. had net sales of 300,000, costs of sales of 150,000, additional expenses of 100,000, depreciation of 50,000, and a tax rate of 30. Use this information to determine the firm's after tax earnings on a cash basis.
 
  A) 0
  B) 30,000
  C) 35,000
  D) 50,000

Question 2

You are considering prepaying an installment loan you took out several months ago. The lender has provided you with the following information.
 
  remaining months to pay 10
  loan payoff 851.29
  monthly payments 95.
 
  00
  balance due in last month of the loan 95.00
  remaining interest on the loan 98.71
 
  You believe you can earn an annual after-tax rate of rate of 16 on your investments in each of the next ten months (1.33 a month). Given the above information, you should
  A)
 
  prepay the loan; your net gain will be about 35.62.
  B)
 
  not prepay the loan; your net gain will be about 35.62.
  C)
 
  prepay the loan; your net gain will be about 14.80.
  D)
 
  not prepay the loan; your net gain will be about 14.80.


Carissamariew

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Reply #1 on: Jul 11, 2018
Answer to Question 1

D
Explanation: D) After-tax cash flow = (Sales - COGS - Dep)(1 - t) + Dep = (300,000 - 150,000 - 100,000 - 50,000 )(1-.30 ) + 50,000 = 50,000.

Answer to Question 2

A


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