Question

Hot and Cold has annual sales of $950,000, annual depreciation of $125,000, and net working capital of $243,000. The tax rate is 40 percent and the profit margin is 8 percent. The firm has no interest expense. What is the amount of the operating cash flow?

Answer 1

$201,000

Step-by-step explanation:

Calculation to determine the amount of the operating cash flow

Using this formula

OCF=(Annual sales*Profit margin )+Annual depreciation

Let plug in the formula

OCF = ($950,000*.08)+ $125,000

OCF=$76,000+$125,000

OCF=$201,000

Therefore the amount of the operating cash flow is $201,000