The Jupiter Corporation has a gross profit of $743,000 and $276,000 in depreciation expense. The Saturn Corporation also has $743,000 in gross profit, with $47,700 in depreciation expense. Selling and administrative expense is $164,000 for each company.
a. Given that the tax rate is 40 percent, compute the cash flow for both companies.
b. What is the difference in cash flow between the two firms?