Question

Bennett Co. has a potential new project that is expected to generate annual revenues of $253,100, with variable costs of $140,000, and fixed costs of $58,300. To finance the new project, the company will need to issue new debt that will have an annual interest expense of $19,500. The annual depreciation is $23,200 and the tax rate is 40 percent. What is the annual operating cash flow?

Answer 1

Hence, the annual operating cash flow is: $44860

Step-by-step explanation:

Year 0 Year 1

Initital investment

Inflows $253,100

variable costs ($140,000)

fixed cost (53800)

Depreciton ($23,200)

Interest expense ($19,500)

Net cash inflows $16600

Tax at 40% ($6640)

Net Cashinflows after tax $9960

Add Depreciation $23,200

Interest net of tax $11.700

Operating cashflows $44860

Hence, the annual operating cash flow is: $44860