Question

Marie's Fashions is considering a project that will require $41,000 in net working capital and $60,000 in fixed assets. The project is expected to produce annual sales of $62,000 with associated cash costs of $37,000. The project has a three-year life. The company uses straight-line depreciation to a zero book value over the life of the project. The tax rate is 25 percent. What is the operating cash flow for this project

Answer 1

Answer:

$16,250

Explanation:

Calculation to determine the Operating cash flow

Operating cash flow = ($62,000 - $77,000)(1 - 0.25) + ($60,000/3)(0.25)

Operating cash flow =($15,000*0.75)+$5,000

Operating cash flow =$11,250+5,000

Operating cash flow =$16,250

Therefore the Operating cash flow will be $16,250