Net cash flow to change either positively or negatively

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Detemination of how much the depreciation change cause the net cash flow to change either positively or negatively.

For 2005, Omega Metals reported $9,000 of sales, $6,000 of operating costs other than depreciation, and $1,500 of depreciation. The company had no amortization charges, it had issued $4,000 of bonds that carry a 7% interest rate, and its federal-plus-state income tax rate was 20%. 2006 data are expected to remain unchanged except for one item, depreciation, which is expected to increase by $1,000. By how much will the depreciation change cause the net cash flow to change? Note that the company uses the same depreciation for tax and stockholder reporting. Be careful to record whether the change is positive or negative.

Reference no: EM1310661

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