Question

Graff has sales of $49,800, costs of $23,700, depreciation expense of $2,300, and interest expense of $1,800. If the tax rate is 22%, what is OCF?

a) $23,020
b) $25,220
c) $19,020
d) $27,220

Answer 1

To calculate OCF, subtract costs, depreciation, and interest expenses from sales and apply the tax rate.

Step-by-step explanation:

To calculate OCF (Operating Cash Flow), we need to start with the formula:

OCF = Sales - Costs - Depreciation - Interest + Taxes.

Given the values:

• Sales = $49,800
• Costs = $23,700
• Depreciation expense = $2,300
• Interest expense = $1,800
• Tax rate = 22%

Plugging in the values, we get:

OCF = $49,800 - $23,700 - $2,300 - $1,800 + ($49,800 - $23,700 - $2,300 - $1,800) * 0.22 = $27,220.

Therefore, the correct answer is d) $27,220.