Question

A proposed new project has projected sales of $177,000, costs of $89,000, and depreciation of $24,600. The tax rate is 24 percent. Calculate operating cash flow using the four different approaches

Answer 1

Operating Cash flow 72,784

Step-by-step explanation:

sales 177,000

cost (89,000)

depreciation (24,600)

income before taxes 63,400

income tax expense

63,400 x24% (15,216)

Net income 48,184

1)

net income + non monetary term (depreciation)

48,184 + 24,600 = 72,784

2) direct method

collected from customer 177,000

payment to supplier (89,000)

tax paid (15,216)

cash flow 72.784‬

3) EBIT + depreciation - taxes

63,400 -15,216 + 24,600 = 72.784‬