The Berndt Corporation expects to have sales of $11 million. Costs other than depreciation are expected to be 70% of sal

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The Berndt Corporation expects to have sales of $11 million.Costs other than depreciation are expected to be 70% of sales, anddepreciation is expected to be $1.65 million. All sales revenueswill be collected in cash, and costs other than depreciation mustbe paid for during the year. The federal tax rate is 21% (ignoreany possible state corporate taxes). Berndt has no debt.
Net income: $
Net cash flow: $
I. If depreciation doubled, taxable incomewould fall to zero, taxes would be zero, and net cash flow would beunaffected.II. If depreciation doubled, taxable incomewould fall to zero, taxes would be zero, and net cash flow wouldrise.III. If depreciation doubled, taxable incomewould fall to zero, taxes would be zero, and net cash flow woulddecline.IV. If depreciation doubled, taxable incomewould not be affected since depreciation and amortization arenon-cash expenses. Net cash flow would also be unaffected.V. If depreciation doubled, taxable incomewould not be affected since depreciation and amortization arenon-cash expenses. Net cash flow would double.
-Select-IIIIIIIVVItem 3
I. If depreciation were halved, taxableincome and taxes would decline but net cash flow would rise.II. If depreciation were halved, taxableincome, taxes, and net cash flow would all decline.III. If depreciation were halved, taxableincome and net cash flow would rise but taxes would fall.IV. If depreciation were halved, taxableincome and taxes would rise but net cash flow would fall.V. If depreciation were halved, taxableincome, taxes, and net cash flow would all rise.
-Select-IIIIIIIVVItem 4
I. You should prefer to have higherdepreciation charges and therefore higher net income. Net incomerepresents the funds that are available to the owners to withdrawfrom the firm and, therefore, net income should be more importantto them than net cash flows.II. You should prefer to have lowerdepreciation charges and therefore higher net income. Net incomerepresents the funds that are available to the owners to withdrawfrom the firm and, therefore, net income should be more importantto them than net cash flows.III. You should prefer to have higherdepreciation charges and therefore higher net income. Net cashflows are the funds that are available to the owners to withdrawfrom the firm and, therefore, cash flows should be more importantto them than net income.IV. You should prefer to have higherdepreciation charges and therefore higher cash flows. Net cashflows are the funds that are available to the owners to withdrawfrom the firm and, therefore, cash flows should be more importantto them than net income.V. You should prefer to have lowerdepreciation charges and therefore higher cash flows. Net cashflows are the funds that are available to the owners to withdrawfrom the firm and, therefore, cash flows should be more importantto them than net income.
-Select-IIIIIIIVVItem 5