Question

the expected revenue associated with the trucks is $105,000 per year with annual operating costs of $57,000. the firm's marginal tax rate is 30.0%. what is the after-tax operating cash flow for year 5?

Answer 1

The after-tax operating cash flow for year 5 is calculated by subtracting the tax paid on the operating income from the operating income itself. The operating income is found by subtracting annual operating costs from total revenue. After applying the 30% marginal tax rate, the after-tax operating cash flow for year 5 is $33,600.

Step-by-step explanation:

To calculate the after-tax operating cash flow for year 5, based on the provided annual revenue and operating costs for a firm's trucks, along with the marginal tax rate, one should follow these steps:

• Determine the operating income by subtracting the operating costs from the total revenue.
• Calculate the amount of tax paid by multiplying the operating income by the marginal tax rate.
• Then subtract the tax paid from the operating income to obtain the after-tax operating cash flow.

Given:

• Total Revenue: $105,000
• Annual Operating Costs: $57,000
• Marginal Tax Rate: 30.0%

First, calculate the operating income:

Operating Income = Total Revenue - Operating Costs
= $105,000 - $57,000
= $48,000

Next, calculate the tax paid:

Tax Paid = Operating Income × Marginal Tax Rate
= $48,000 × 30%
= $14,400

Finally, calculate the after-tax operating cash flow:

After-Tax Operating Cash Flow = Operating Income - Tax Paid
= $48,000 - $14,400
= $33,600

The after-tax operating cash flow for the trucks in year 5 is $33,600.