Question

A company has sales of $16,000,000, costs of $5,000,000, and a depreciation expenditure of $5,000,000. The company pays taxes at a rate of 21% and paid $1,500,000 in interest expenses. The company also increased its net working capital by $1,000,000. What would be the company's operating cash flow (OCF) this year?

A. $5,055,000
B. $9,055,000
C. $9,740,000
D. $10,055,000
E. $11,240,000

Answer 1

To calculate the operating cash flow (OCF) of the company, you can use the formula: OCF = Sales - Costs - Depreciation + Tax + Interest + Changes in Working Capital. Substituting the given values into the formula, the company's OCF this year is $9,055,000.

Step-by-step explanation:

To calculate the operating cash flow (OCF) of the company, we need to use the formula:
OCF = Sales - Costs - Depreciation + Tax + Interest + Changes in Working Capital

Given that the company has sales of $16,000,000, costs of $5,000,000, depreciation expenditure of $5,000,000, taxes at a rate of 21%, interest expenses of $1,500,000, and an increase in net working capital of $1,000,000, we can substitute these values into the formula:

OCF = $16,000,000 - $5,000,000 - $5,000,000 + ($16,000,000 - $5,000,000 - $5,000,000) x 21% + $1,500,000 + $1,000,000

Simplifying the equation, we get:
OCF = $9,055,000

Therefore, the company's operating cash flow (OCF) this year is $9,055,000.