Asked by Jallisa Jackson on Jun 24, 2024
Verified
Last year the sales at Summit Corporation were $419,000 and were all cash sales. The expenses at Summit were $259,500 and were all cash expenses. The tax rate was 30%. The after-tax net cash inflow at Summit last year was:
A) $159,500
B) $47,850
C) $111,650
D) $419,000
Cash Sales
Transactions where payment for goods or services is made at the time of sale in cash or its equivalent.
Cash Expenses
Expenses that a business or individual pays out in cash, excluding non-cash expenses such as depreciation.
Tax Rate
The rate at which taxes are levied on an individual or company.
- Scrutinize the role of incremental cash flows in the total feasibility of a project.
- Get to know the influence of income taxes on the profitability and cash flows of projects.
Verified Answer
AA
Alparslan Akp?narJun 27, 2024
Final Answer :
C
Explanation :
To calculate the after-tax net cash inflow, we first need to find the taxable income:
Sales - Expenses = Taxable Income
$419,000 - $259,500 = $159,500
Then, we can calculate the taxes owed:
Taxable Income x Tax Rate = Taxes Owed
$159,500 x 0.30 = $47,850
Finally, we can calculate the after-tax net cash inflow:
Sales - Expenses - Taxes Owed = After-Tax Net Cash Inflow
$419,000 - $259,500 - $47,850 = $111,650
Sales - Expenses = Taxable Income
$419,000 - $259,500 = $159,500
Then, we can calculate the taxes owed:
Taxable Income x Tax Rate = Taxes Owed
$159,500 x 0.30 = $47,850
Finally, we can calculate the after-tax net cash inflow:
Sales - Expenses - Taxes Owed = After-Tax Net Cash Inflow
$419,000 - $259,500 - $47,850 = $111,650
Learning Objectives
- Scrutinize the role of incremental cash flows in the total feasibility of a project.
- Get to know the influence of income taxes on the profitability and cash flows of projects.
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