Paderno Inc.had cash sales of $1,300,000 and operating expenses of $825,000 for the year just ended.Included in the operating expenses was $220,000 of depreciation expense with the rest being cash expenses.If Paderno's income tax rate is 35%,its net after-tax cash flows amounted to:

Question

Quizplus · Accepted Answer

First, we need to calculate Paderno's earnings before interest and taxes (EBIT):
EBIT = Cash sales - Operating expenses (excluding depreciation)
EBIT = $1,300,000 - ($825,000 - $220,000) = $695,000

Then, we need to calculate Paderno's taxable income:
Taxable income = EBIT - Depreciation expense
Taxable income = $695,000 - $220,000 = $475,000

Finally, we can calculate Paderno's net after-tax cash flows:
Net income = Taxable income x (1 - Tax rate)
Net income = $475,000 x (1 - 0.35) = $308,750

Therefore, the correct answer is B) $528,750.