Question

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

Answer 1

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

Answer 2

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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