Question

a five year project is expected to generate annual revenues of $210,000, variable costs of $9,000, and fixed costs of $22,000. the annual depreciation is $24,000 and the tax rate is 21 percent. what is the annual operating cash flow

Answer 1

The annual operating cash flow for the project is calculated as $184,370 by using the given revenues, costs, depreciation, and tax rate, and following a specific formula that includes these variables.

Step-by-step explanation:

To calculate the annual operating cash flow, we use the given information: annual revenues, variable costs, fixed costs, depreciation, and tax rate. The annual operating cash flow for the project is calculated as $184,370 by using the given revenues, costs, depreciation, and tax rate, and following a specific formula that includes these variables.

The operating cash flow (OCF) can be determined by using the formula:

OCF = (Revenues - Variable Costs - Fixed Costs + Depreciation) * (1 - Tax Rate) + Depreciation

Plugging the provided numbers into the formula, we get:

OCF = ($210,000 - $9,000 - $22,000 + $24,000) * (1 - 0.21) + $24,000

OCF = ($203,000) * 0.79 + $24,000

OCF = $160,370 + $24,000

OCF = $184,370

Therefore, the annual operating cash flow for the project is $184,370.