A project currently generates sales of $10.4 million, variable costs equal to 50% of sales, and fixed costs of $2.2 million. The firm’s tax rate is 30%.
a.What are the effects on the after-tax profits and cash flow, if sales increase from $10.4 million to $11.8 million. (amounts as positive values. do not round intermediate calculations. answer in million rounded to 3 decimal places.)
After tax profit: decreased? increased? by $ ____million??
Cash flow increased? decreased? by $ million.????
b.What are the effects on the after-tax profits and cash flow, if variable costs increase to 60% of sales.