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A project is expected to generate annual revenues of $114,500, with variable costs of $73,600, and fixed costs of $14,300. The annual depreciation is $3,650 and: the tax rate is 21 percent. What is the annual operating cash flow?

User Pareshgoel
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2 Answers

3 votes

Final answer:

The annual operating cash flow is $22,950.

Step-by-step explanation:

To calculate the annual operating cash flow, we need to subtract the total expenses from the total revenues. The total expenses include the variable costs, fixed costs, and depreciation. The formula to calculate the annual operating cash flow is:

Operating Cash Flow = Total Revenues - (Variable Costs + Fixed Costs + Depreciation)

Using the given values:

Operating Cash Flow = $114,500 - ($73,600 + $14,300 + $3,650)

Operating Cash Flow = $22,950

User Tudvari
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8.9k points
3 votes

Final answer:

The annual operating cash flow of the project is $29,641, calculated by first determining the project's net income before taxes and then adjusting for taxes and non-cash expenses like depreciation.

Step-by-step explanation:

To calculate the annual operating cash flow for a project, you must start with the formula:

Operating Cash Flow = (Revenues - Variable Costs - Fixed Costs + Depreciation) * (1 - Tax Rate) + Depreciation

From the information provided, plugging in the numbers:

Revenues = $114,500

Variable Costs = $73,600

Fixed Costs = $14,300

Depreciation = $3,650

Tax Rate = 21%

Calculating the operating cash flow:

Operating Cash Flow = ($114,500 - $73,600 - $14,300 + $3,650) * (1 - 0.21) + $3,650

Operating Cash Flow = ($29,250 + $3,650) * 0.79 + $3,650

Operating Cash Flow = ($32,900) * 0.79 + $3,650

Operating Cash Flow = $25,991 + $3,650

Operating Cash Flow = $29,641

Therefore, the annual operating cash flow of the project is $29,641.

User Arnie
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