A five-year project is expected to generate annual revenues of $159,000, variable costs of $72,500, and fixed costs of $15,000. The annual depreciation is $19,500 and the tax rate is 21 percent. What is the annual operating cash flow

Respuesta :

Answer:

$60,580

Explanation:

According to the scenario, computation of the given data are as follow:-

Operating Cost Flow  is

Particular               Amount($)

Sales                       $159,000

Less - Variable cost    -$72,500

Less - Fixed cost       -$15,000

Less - Depreciation      -$19,500

Total Before Tax       $52,000

Less: tax expense        -$10,920     ($52,000 × 21%)

Add - Depreciation $19,500

Operating cash flow $60,580

The operating cash flow is the cash flow in which the cash is generated in order to paying off the expenses

Based on the information given the annual operating cash flow is $60,580.

Using this formula

Operating cash flow =(Sales revenue - Variables costs - Fixed costs - Depreciation)(1 - tax rate) + Depreciation

Let plug in the formula

Operating cash flow =($159,000 -$72,500 - $15,000 - $19,500)(1 - 0.21) + $19,500

Operating cash flow =$52,000(.79)+$19,500

Operating cash flow =$41,080 +$19,500

Operating cash flow = $60,580

Inconclusion the annual operating cash flow is $60,580.

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