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Business, 02.03.2020 17:32 izabelllreyes

Coolidge Cola is forecasting the following income statement:Sales$30,000,000Operating costs excluding depr and amort20,000,000EBITDA$10,000,000Dep reciation and amortization5,000,000Operating income (EBIT)$ 5,000,000Interest expense2,000,000Taxable income (EBT)$ 3,000,000Taxes (40%)1,200,000Net income$ 1,800,000Assume that depreciation is Coolidge’s only non-cash revenue or expense. Congress is considering a proposal allowing companies to depreciate their equipment at a faster rate. If approved, Coolidge’s new depreciation expense would be $8,000,000, although there would be no effect on the economic value of the company’s equipment, nor would it affect the company’s tax rate, which would remain at 40%. If this proposal were implemented, what would be the company’s net cash flow?a. $2,000,000b. $4,000,000c. $6,800,000d. $8,000,000e. $9,800,000

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