Question

kanji publishing is considering upgrading its machinery used in the production of its books. with the upgrade, the company expects to be able to generate additional revenues of $100,000, which would result in the additional cost of sales of $55,000. it is expected that all sales will be collected in the year of sale. if the company's tax rate is 30%, the after-tax cash inflow from the additional revenues is______

Answer 1

The after-tax cash inflow from Kanji Publishing's expected additional revenues of $100,000, with additional costs of sales of $55,000 and a tax rate of 30%, is $31,500.

Step-by-step explanation:

To calculate the after-tax cash inflow from the additional revenues that Kanji Publishing expects to generate from upgrading its machinery, we must first determine the pre-tax profit, then subtract the taxes owed.

The additional revenues are $100,000, and the additional cost of sales are $55,000. The pre-tax profit is calculated as:

Additional Revenues - Cost of Sales = Pre-Tax Profit

$100,000 - $55,000 = $45,000

Now, to find the post-tax profit, we multiply the pre-tax profit by (1 - Tax Rate):

$45,000 x (1 - 0.30) = $45,000 x 0.70

= $31,500

Therefore, the after-tax cash inflow from the additional revenues, considering the 30% tax rate, is $31,500.