Question

You have calculated the pro forma net income for a new project to be \( \$ 45,930 \). The incremental taxes are \( \$ 22,260 \) and incremental depreciation is \( \$ 16,320 \). What is the operating c

Answer 1

The operating cash flow for the project is calculated by adding the non-cash charge of depreciation to the net income and adjusting for taxes, resulting in an operating cash flow of $39,990.

Step-by-step explanation:

You have calculated the pro forma net income for a new project to be $45,930. The incremental taxes are $22,260 and incremental depreciation is $16,320. To find the operating cash flow, we add back the non-cash charge of depreciation to the net income and then adjust for taxes.

The formula to calculate operating cash flow (OCF) is:
OCF = Net Income + Depreciation - Taxes

Applying the values provided:
OCF = $45,930 + $16,320 - $22,260
OCF = $39,990

Therefore, the operating cash flow for the project is $39,990.

Answer 2

The operating cash flow for the new project is $39,990, calculated by adding the non-cash charge of depreciation ($16,320) to the net income ($45,930) and subtracting the incremental taxes ($22,260).

Step-by-step explanation:

You have calculated the pro forma net income for a new project to be $45,930. The incremental taxes are $22,260 and the incremental depreciation is $16,320. To find the operating cash flow, we need to add back the non-cash charge of depreciation to the net income and then account for the taxes paid. The formula for operating cash flow (OCF) in this situation is:

OCF = Net Income + Depreciation - Taxes

Using the values provided:

OCF = $45,930 + $16,320 - $22,260

OCF = $39,990

Therefore, the operating cash flow for this project is $39,990.