Question

A direct participation program shows the following operation results: Revenues: $3 million Operating expense: $1 million Interest expense: $200,000 Management fees: $200,000 Depreciation: $3 million The cash flow from program operation is

Answer 1

Answer:

The cash flow from program operation is $1,600,000.

Explanation:

Prepare the Cash Flow from Operating Activities Section to determine the cash flow from program operation.

Cash Flow from Operating Activities

Revenue                                                     $3,000,000

Less Expenses :

Operating Expenses           $1,000,000

Interest expense                   $200,000

Management fees                 $200,000

Depreciation                       $3,000,000  ($4,400,000)

Operating Profit / (Loss)                            ($1,400,000)

Add Back Depreciation                             $3,000,000

Operating Cash flow                                  $1,600,000