Straton company has EBIT OF $435,000.It has 35 percent marginal tax rate.It prod
ID: 2629599 • Letter: S
Question
Straton company has EBIT OF $435,000.It has 35 percent marginal tax rate.It produces $120,000 in depreciation. The project has the following changes in year 1:
WITHOUT THE PROJECT WITH HE PROJECT
Accounts receivable $49,000 $63,000
Inventory $61,000 $88,000 `
Accounts payable $78,000 $93,00
What is straton
Explanation / Answer
(1 - 0.35)*435000 + 49000 - 78000 - 61000 = 192750 without project
(1 - 0.35)*435000 + 63000 - 93000 - 88000 = 164750 with project
depreciation isn't counted as cash expense