Question

A project has annual depreciation of $25,100, costs of $101,300, and sales of $149,500. The applicable tax rate is 40 percent. What is the operating cash flow?

Answer 1

$38,960

Step-by-step explanation:

Data provided in the question:

Annual depreciation = $25,100

Costs = $101,300

Sales = $149,500

Tax rate = 40% = 0.40

Now,

Operating cash flow

= ( Sales - Costs ) × (1 - tax rate) + Tax savings on depreciation

or

Operating cash flow = ( $149,500 - $101,300 ) × ( 1 - 0.4 ) + ( 0.4 × $25,100 )

or

Operating cash flow = $28,920 + $10,040

or

Operating cash flow = $38,960