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Determining the effect on the firm cash flow

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Reference no: EM132795935

1.) BJR Food Corporation is forecasting the following income statement for the firm's upcoming fiscal year:

Sales $95,000,000

Operating Expenses 50,000,000

Depreciation Expense 10,000,000

Operating Income $35,000,000

Interest Expense 5,000,000

Other Expenses 1,500,000

Pre Tax Income $28,500,000

Taxes (25%) 7,125,000

Net Income $21,375,000

Assume that with the exception of Depreciation, all items are cash. Congress is considering a proposal to allow accelerated depreciation on a type of equipment that BJR Food uses in their production process. If this provision were to be put in place, depreciation expense would increase by $3,500,000 (tax rate would stay the same). What would be the effect on the firm's cash flow if this proposal were to be enacted?

Reference no: EM132795935

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