Question

Hailey, Inc., has sales of $19,730, costs of $9,300, depreciation expense of $1,970, and interest expense of $1,460. Assume the tax rate is 35 percent. What is the operating cash flow, or OCF? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Operating cash flow

Answer 1

Operating cash flow is $7,980

Step-by-step explanation:

EBIT = sales of $19,730 - costs of $9,300 - depreciation expense of $1,970 = $8,460

Tax = (EBIT of $8,460 - interest expense of $1,460) * Tax rate 35%

= $2,450

The operating cash flow (OCF) = EBIT + Depreciation - Tax = $8,460 + $1,970 - $2,450 = $7,980