Question

The Paintball Range paid $30,500 in dividends and $7,600 in interest over the past year. Sales totaled $211,800 with costs of $167,900. Deprecation expense was $16,500. The tax rate was 34%. What is the amount of Operating Cash Flow?

Answer 1

The Operating Cash Flow for The Paintball Range is calculated by subtracting costs and taxes from sales and adding depreciation expense, resulting in OCF of $50,084.

Step-by-step explanation:

To calculate the Operating Cash Flow (OCF) for The Paintball Range, we start with the sales and subtract the costs and taxes. Using the income statement figures provided:

OCF = (Sales - Costs) + Depreciation Expense - Taxes

First, compute the EBIT (Earnings Before Interest and Taxes):

EBIT = Sales - Costs - Depreciation Expense
EBIT = $211,800 - $167,900 - $16,500
EBIT = $27,400

Next, calculate the tax payment:

Taxes = EBIT × Tax Rate
Taxes = $27,400 × 34%
Taxes = $9,316

Now, we can compute the OCF:

OCF = (Sales - Costs) + Depreciation Expense - Taxes
OCF = ($211,800 - $167,900) + $16,500 - $9,316
OCF = $43,900 + $16,500 - $9,316
OCF = $50,084

The amount of Operating Cash Flow for The Paintball Range is $50,084.