Question

A project will reduce costs by $38,500 but increase depreciation by $18,300. What is the operating cash flow if the tax rate is 35 percent?

Answer 1

$31,430

Step-by-step explanation:

A project will reduce costs by $38,500

The project will have an increased depreciation of $18,300

The tax rate is 35%

= 35/100

= 0.35

Therefore, the operating cash flow can be calculated as follows

Operating cash flow= reduction in project cost×(1-tax rate)+(increase in the depreciation amount ×tax rate)

= $38,500×(1-0.35)+($18,300×0.35)

= $38,500×0.65+6,405

= $25,025+$6,405

= $31,430

Hence the operating cash flow is $31,430