Question

Tubby toys estimates that its new line of rubber ducks will generate sales of $7.90 million, operating costs of $4.90 million, and a depreciation expense of $1.90 million. if the tax rate is 30%, what is the firm’s operating cash flow?

Answer 1

To calculate the operating cash flow, deduct the operating costs and depreciation expenses from the sales revenue.

Step-by-step explanation:

To calculate the operating cash flow, we need to start with the net income. Net income is calculated by deducting the operating costs and depreciation expenses from the sales revenue. In this case, the sales revenue is $7.90 million, the operating costs are $4.90 million, and the depreciation expense is $1.90 million. So, the net income is $7.90 million - $4.90 million - $1.90 million = $1.10 million.

The next step is to calculate the taxes. The tax rate is given as 30%, so the tax amount is $1.10 million * 0.30 = $0.33 million. Finally, to calculate the operating cash flow, we subtract the taxes from the net income. Operating cash flow = Net income - Taxes = $1.10 million - $0.33 million = $0.77 million.