Question

ABC, Inc. is considering purchase of a new equipment. The sales are expected to be $808,133 and the total cash expenses are expected to be $394,925. The annual depreciation is $77,434 and the tax rate is 37.8%. What is the operating cash flow?

Answer 1

Answer:

Net Operating Cash Flow = $286,285

Explanation:

Total expected Sales = $808,133

Total Expected Expense = $394,925

Therefore cash revenue = $413,208

After this depreciation will be charged = $77,434

Net profit after depreciation = $335,774

Tax @ 37.8% = $126,923

Net profit after tax = $335,774 - $126,923 = $208,851

Add: Depreciation since non cash in nature = $77,434 + $208,851 = $286,285 = Net Operating Cash Flow