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9 January, 18:33

ABC, Inc. is considering purchase of a new equipment. The sales are expected to be $808,133 and the total cash expenses are expected to be $394,925. The annual depreciation is $77,434 and the tax rate is 37.8%. What is the operating cash flow?

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  1. 9 January, 18:54
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    Net Operating Cash Flow = $286,285

    Explanation:

    Total expected Sales = $808,133

    Total Expected Expense = $394,925

    Therefore cash revenue = $413,208

    After this depreciation will be charged = $77,434

    Net profit after depreciation = $335,774

    Tax @ 37.8% = $126,923

    Net profit after tax = $335,774 - $126,923 = $208,851

    Add: Depreciation since non cash in nature = $77,434 + $208,851 = $286,285 = Net Operating Cash Flow
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