Question

A project is expected to generate annual revenues of $124,100, with variable costs of $77,200, and fixed costs of $17,700. The annual depreciation is $4,250 and the tax rate is 34 percent. What is the annual operating cash flow?

Answer 1

$20,717

Step-by-step explanation:

The calculation of annual operating cash flow is given below:-

Annual Operating cash flow = (Revenue - Variable cost - Fixed cost) × (1 - Tax rate) + Annual depreciation × Tax rate

= ($124,100 - $77,200 - $17,700) × (1 - 34%) + $4,250 × 34%

= $29,200 × 0.66 + $1,445

= $19,272 + $1,445

= $20,717

So, for computing the operating cash flow we simply applied the above formula.