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Operating cash flow will be $79,968
A proposed new project has projected sales of $186,000, costs of $90,500, and depreciation of $24,900. the tax rate is 22 percent. Calculate operating cash flow using the four different approaches.
- EBIT + Depreciation - Taxes
EBIT = S - C -D
EBIT =186,000-90,500-24,900= 70,600
Depreciation = 24,900
Taxes= EBIT x Tax Rate = (.22) x 70,600
= 15,532
EDT= 70,600 + 24,900 - 15,532 = $79,968
- Top-down
= Sales - Costs - Taxes
= 186,000 - 90,500 - 15,532= $79,968
- Tax-shield
= (Sales - Cost) x (1 - tax rate) + Depreciation X Tax rate
= (186,000 - 90,500) x (1 - 0.22) + 24,900 x 0.22 = $79,968
- Bottom-up
= Net income + Depreciation
Net income = EBIT - Tax
Net income = 70,600 - 15,532
= 55,068
= 55,068 + 24,900
= $79,968
What is operating cash flow?
Cash flow from operating activities (CFOA) is the revenue a company generates through ongoing, regular business activities like the creation and sale of goods or the rendering of client services (CFO). It is the first item on a company's cash flow statement.
Learn more about operating cash flow: https://brainly.com/question/17001006
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