Question

Outdoor Sports paid $12,500 in dividends and $9,310 in interest over the past year. Sales totaled $361,820 with costs of $267,940. The depreciation expense was $16,500 and the tax rate was35 percent. What was the amount of the operating cash flow?1. $64,2322. $65,3063. $57,5564. $70,0565. $70,568

Answer 1

Answer:

4) $70,056

Explanation:

We can calculate the net operating cash flow using the following formulas:

• EBIT = total sales - total costs - depreciation expense
• total taxes paid = (EBIT - interest paid) x tax rate
• net operating cash flow = EBIT - total taxes + depreciation expense

operating profit = $361,820 - $267,940 - $16,500 = $77,380

total taxes = ($77,380 - $9,310) x 35% = $68,070 x 35% = $23,824.50

net operating cash flow = $77,380 - $23,824.50 + $16,500 = $70,056