Question

J's Foods is trying to estimate the cash flows in their first year of operation. They project that the firm will have sales of 100,000; operating costs of 50,000; and depreciation of 10,000. If their tax rate is 29% what would the firm's operating cash flow equal?

Answer 1

$38,400

Explanation:

The computation of operating cash flow is shown below:-

Operating cash flow = (Sales - operating costs - depreciation) × (1 - tax) + depreciation

= (100,000 - 50,000 - 10,000) × (1 - 0.29) + 10,000

= (40,000) × (0.71) + 10,000

= $38,400

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