Question

Ben's Border Café is considering a project which will produce sales of $16,000 and increase cash expenses by $10,000. If the project is implemented, taxes will increase from $23,000 to $24,500 and depreciation will increase from $4,000 to $5,500. What is the amount of the operating cash flow using the top-down approach?

Answer 1

Answer:

the amount of the operating cash flow using the top-down approach is $4.500

Explanation:

operating cash flow using the top-down approach

operating cash flow =Sales- increase cash expenses -increase in tax

=16000-10000-(24500-23000)

=$ 4500

Note:increase cash expenses and increase in tax are cash  outflow . Depreciation has not been considered as it is a non cash expenditure.