Coola Cola has annual sales of 30 million, operating costs (excluding depreciation) of 20 million....
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Coola Cola has annual sales of 30 million, operating costs (excluding depreciation) of 20 million. The tax rate is 40%. Depreciation is currently $5 million. The government is considering a proposal which will allow companies to depreciate their equipment at a faster rate. If this provision were put in place, Coolas depreciation expense would be $8,000,000 (instead of $5,000,000). This proposal would have no effect on the economic value of the company's equipment, nor would it affect the company's tax rate, which would remain at 40 percent. If this proposal were to be implemented, what would be the increase in the company's net cash flows? Show two tables. The first with accounting numbers and the second with cash flows.
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