Question: The Rogers Corporation has a gross profit of $789,000 and $249,000 in depreciation expense. The Evans Corporation also has $789,000 in gross profit, with $46,600 in depreciation expense. Selling and administrative expense is $216,000 for each company.
a. Given that the tax rate is 40 percent, compute the cash flow for both companies.
b. Calculate the difference in cash flow between the two firms.