Answer:
The operating cash flow of year 1 for the company is $368,500
Explanation:
In order to calculate the operating cash flow of year 1 for the company first we need to calculate the Cashflow before tax and depreciation as follows:
Cashflow before tax=Sales-Variable cost-fixed cost
Cashflow before tax=$1,100,000-$450,000-$180,000
Cashflow before tax=$470,000
Depreciation = Original cost - Salvage / fixed Cost
Depreciation= $1,200,000 - $300,000 / 5
= $180,000
Therefore, to calculate the operating cash flow of year 1 for the company we would have to make the following calculation:
Operating Cash Flow=(CFBT×65%)+Depreciation×35%
Operating Cash Flow=($470,000×65%)+($180,000×35%)
Operating Cash Flow=$368,500
The operating cash flow of year 1 for the company is $368,500
