Question

As a member of UA Corporation's financial staff, you must estimate the Year 1 cash flow for a proposed project with the following data. What is the Year 1 cash flow?Sales revenues, each year $42,500Depreciation $10,000Other operating costs $17,000Interest expense $4,000Tax rate 35.0%a. $16,351b. $17,212c. $18,118d. $19,071e. $20,075

Answer 1

Answer:

e. $20,075

Explanation:

The computation of the year 1 cash flow is shown below:

= Sales revenue - other operating cost - depreciation expenses - income tax expense + depreciation expenses

where,  

Income tax expense = (Sales revenue - other operating cost - depreciation expenses) × income tax rate  

= ($42,500 - $17,000 - $10,000) × 35%  

= $5,425

And, the other items values would remain the same

Now put these values to the above formula  

So, the value would equal to

= $42,500 - $17,000 - $10,000 - $5,425 + $10,000

= $20,075