What is the amount of depreciation that the firm can claim

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Q1 Given the following income statement data for a local business:

Net sales = $16,500

Depreciation = $1120

Cost of goods sold = $10,350

Interest expense = $900

Tax rate is 34%

a. Calculate net income

b. Calculate operating cash flow

c. Is this company able to cope with a short-term downturn in profitability? Explain your answer.

Q2. A firm has recently purchased equipment at $250,000 with a CCA rate of 25%. Under the Half Year rule, what is the amount of depreciation that the firm can claim as a tax-deductible expense in its second year?

Q3. Moncton Corporation has sales of $255M, operating costs of $175M, and depreciation of $32M. It also has interest costs of $8m and its tax rate is 20%.

Moncton made a net investment in operating capital of $30m during the year. If the company's share price is $17.50 and it has 12m shares outstanding, does Moncton have sufficient free cash flow to repurchase 10% of its shares?

Reference no: EM132858689

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