# TABLE 2.5                  Income Statement  .

###### Question:

TABLE 2.5
Income Statement   2015   2016   2017   2018   2019
Revenue   405.5   363.6   419.6   509.2   602.3
Cost of Goods Sold   (184.2)   (172.1)   (206.0)   (243.4)   (296.0)
Gross Profit   221.3   191.5   213.6   265.8   306.3
Sales and Marketing   (68.6)   (67.3)   (84.0)   (100.5)   (121.0)
Administration   (61.8)   (60.1)   (58.6)   (67.5)   (78.2)
Depreciation & Amortization   (25.6)   (25.7)   (35.5)   (38.5)   (37.7)
EBIT   65.3   38.4   35.5   59.3   69.4
Interest Income (Expense)   (31.8)   (33.4)   (30.9)   (38.0)   (39.3)
Pretax Income   33.5   5.0   4.6   21.3   30.1
Income Tax   (11.7)   (1.8)   (1.6)   (7.5)   (10.5)
Net Income   21.8   3.2   3.0   13.8   19.6
Shares outstanding (millions)   54.7   54.7   54.7   54.7   54.7
Earnings per share   $0.40$0.06   $0.05$0.25   $0.36 Balance Sheet 2015 2016 2017 2018 2019 Assets Cash 50.1 73.4 88.4 77.6 85.8 Accounts Receivable 90.4 69.2 69.9 78.7 84.4 Inventory 35.2 32.1 27.6 30.3 35.9 Total Current Assets 175.7 174.7 185.9 186.6 206.1 Net Property, Plant & Equip. 244.8 246.1 306.7 347.5 349.6 Goodwill & Intangibles 356.7 356.7 356.7 356.7 356.7 Total Assets 777.2 777.5 849.3 890.8 912.4 Liabilities & Stockholders' Equity Accounts Payable 18.5 19.8 23.7 24.9 31.7 Accrued Compensation 7.5 5.8 6.5 8.7 9.5 Total Current Liabilities 26.0 25.6 30.2 33.6 41.2 Long-term Debt 497.9 497.9 573.7 598.9 598.9 Total Liabilities 523.9 523.5 603.9 632.5 640.1 Stockholders' Equity 253.3 254.0 245.4 258.3 272.3 Total Liabilities & Stockholders' Equity 777.2 777.5 849.3 890.8 912.4 Statement of Cash Flows 2015 2016 2017 2018 2019 Net Income 21.8 3.2 3.0 13.8 19.6 Depreciation & Amortization 25.6 25.7 35.5 38.5 37.7 Chg. in Accounts Receivable 3.9 21.2 -0.7 (8.8) (5.7) Chg. in Inventory (2.9) 3.1 4.5 (2.7) (5.6) Chg. in Pay. & Accrued Comp. 2.6 (0.4) 4.6 3.4 7.6 Cash from Operations 51.0 52.8 46.9 44.2 53.6 Capital Expenditures (25.4) (24.1) (102.3) (74.8) (39.8) Cash from Investing Activ. (25.4) (24.1) (102.3) (74.8) (39.8) Dividends Paid (5.4) (5.4) (5.4) (5.4) (5.6) Sale (or purchase) of stock - - - - - Debt Issuance (Pay Down) - - 75.8 25.2 - Cash from Financing Activ. (5.4) (5.4) 70.4 19.8 (5.6) Change in Cash 20.2 23.3 15.0 (10.8) 8.2 Mydeco Stock Price$8.89   $4.21$4.66   $9.51$12.19

See Table 2.5 3 showing financial statement data and stock price data for Mydeco Corp. Suppose Mydeco had purchased additional equipment for $12.6 million at the end of 2016, and this equipment was depreciated by$4.2 million per year in 2017, 2018, and 2019. Given Mydeco's tax rate of 35%, what impact would this additional purchase have had on Mydeco's net income in years 2016-2019? (Assume the equipment is paid for out of cash and that Mydeco earns no interest on its cash balances.) Calculate the new net income below: (Round to one decimal place.) (millions) Year 2016 Net Income Additional Depreciation Tax Savings New Net Income

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