Question

A proposed new project has projected sales of $186,000, costs of $90,500, and depreciation of $24,900. the tax rate is 22 percent. Calculate operating cash flow using the four different approaches.

Answer 1

Operating cash flow will be $79,968

A proposed new project has projected sales of $186,000, costs of $90,500, and depreciation of $24,900. the tax rate is 22 percent. Calculate operating cash flow using the four different approaches.

• EBIT + Depreciation - Taxes

EBIT = S - C -D

EBIT =186,000-90,500-24,900= 70,600

Depreciation = 24,900

Taxes= EBIT x Tax Rate = (.22) x 70,600

= 15,532

EDT= 70,600 + 24,900 - 15,532 = $79,968

• Top-down

= Sales - Costs - Taxes

= 186,000 - 90,500 - 15,532= $79,968

• Tax-shield

= (Sales - Cost) x (1 - tax rate) + Depreciation X Tax rate

= (186,000 - 90,500) x (1 - 0.22) + 24,900 x 0.22 = $79,968

• Bottom-up

= Net income + Depreciation

Net income = EBIT - Tax

Net income = 70,600 - 15,532

= 55,068

= 55,068 + 24,900

= $79,968

What is operating cash flow?

Cash flow from operating activities (CFOA) is the revenue a company generates through ongoing, regular business activities like the creation and sale of goods or the rendering of client services (CFO). It is the first item on a company's cash flow statement.

Learn more about operating cash flow: brainly.com/question/17001006

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