Question

Suppose that Tomorrowland Speedway Incorporated is estimating cash flows for a new project.  The projections for the first year are as follows:

Sales Revenue	$400,000
Cost of Goods	40% of sales
Other expenses (excluding depreciation)	22% of sales
Depreciation	$25,000
Investment in NWC	$11,000
Investment in Gross PPE	$27,500
Cash flow from side effects	-$18,000
Interest Payment on Debt	$12,000

If the tax rate facing the firm is 34%, what is the project cash flow for the first year?

Question 11 options:

	$44,400
	$88,320
	$52,320
	$58,420
	$54,960

Answer 1

Projected Cash flow

Particulars	Amount
Sales	$      4,00,000
Cost of goods sold	$      1,60,000
Other expenses	$         88,000
EBITDA	$      1,52,000
Less: Depreciation	$         25,000
EBIT	$      1,27,000
Less: Interest	$         12,000
EBT	$      1,15,000
Less: Taxes @34%	$         39,100
EAT	$         75,900
Add: Depreciation	$         25,000
Less : Increase in NWC	$         11,000
Cash flow from operating activities	$         89,900
Cash flow from Investing activities	$        -27,500
Cash flow side effects	$        -18,000
Projected cash flows	$         44,400

OPtion 1 has to be selected

Pls do rate, if the answer is correct and comment, if any further assistance is required.