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marissa [1.9K]
3 years ago
11

"Bennett Co. has a potential new project that is expected to generate annual revenues of $247,700, with variable costs of $137,6

00, and fixed costs of $56,500. To finance the new project, the company will need to issue new debt that will have an annual interest expense of $16,500. The annual depreciation is $22,000 and the tax rate is 40 percent. What is the annual operating cash flow?"
Business
1 answer:
Nostrana [21]3 years ago
5 0

Answer:

$40,960

Explanation:

The computation of the operating cash flow is shown below;

As we know that

Annual Operating Cash Flow is

= EBIT × (1 - Tax Rate) + Depreciation Expenses

Here,

Earnings Before Interest & Tax [EBIT] = Revenues - Variable Cost - Fixed Costs - Depreciation Expenses

= $247,700 - $137,600 - $56,500 - $22,000

= $31,600

Now

Annual Operating Cash Flow = EBIT × (1 - Tax Rate) + Depreciation Expenses

= $31,600 × (1 - 0.40) + $22,000

= [$31,600 × 0.60] + $22,000

= $18,960 + 22,000

= $40,960

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