Question

A nine-year project is expected to generate annual revenues of $137,800, variable costs of $82,600, and fixed costs of $11,000. The annual depreciation is $23,500 and the tax rate is 34 percent. What is the annual operating cash flow?a. $37,162

b. $14,301
c. $35,052
d. $13,662
e. $36,506

Answer 1

Option (a) is correct.

Step-by-step explanation:

Given that,

Annual revenues = $137,800,

variable costs = $82,600

Fixed costs = $11,000

Annual depreciation = $23,500

Tax rate = 34 percent

Annual Income before Taxes:

= Annual revenues - Variable cost - Fixed Costs - Depreciation

= $137,800 - $82,600 - $11,000 - $23,500

= $20,700

Net income:

= Annual Income before Taxes × ( 1 - T)

= $20,700 × 0.66

= $13,662

Annual operating cash flow:

= Net income + Depreciation

= $13,662 + $ 23,500

= $37,162