Question

Bi-Lo Traders is considering a project that will produce sales of $44,800 and have costs of $25,700. Taxes will be $4,500 and the depreciation expense will be $2,650. An initial cash outlay of $2,100 is required for net working capital. What is the project's operating cash flow?

Answer 1

$10,700

Step-by-step explanation:

Operating cash flow is computed as;

= Net income + non cash expenses - outlay in working capital

First, we'll determine the net income

Net income = Sales $44,800 - cost $27,500 depreciation expense $2,650 - Taxes $4,500

Net income = $10,150

Operating cash flow = $10,150 + $2,650 - $2,100 = $10,700