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Pancake Village had sales of $1.5 million with depreciation of $350,000 and other operating costs that...

Pancake Village had sales of $1.5 million with depreciation of $350,000 and other operating costs that ran 35% of sales. They paid $180,000 in dividends with a tax rate of 40% and interest expense of $280,000. What was their Net Cash Flow? A. $449,000 B. $767,000 C. $557,000 D. $872,000

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Expert Solution

CALCULAITON OF NET INCOME AFTER TAX
Sales $         15,00,000
Less : Expenses
Operating Cost 35% of Sales = $             5,25,000
Depreciation $             3,50,000
Interest Expenses $             2,80,000
$      11,55,000
Net Income $        3,45,000
Less: Taxation @ 40% = $            1,38,000
Net income After Tax $            2,07,000
CALCULATION OF THE CASH FLOW
Net Income after Tax= $        2,07,000
Add: Depreciation $        3,50,000
Total Cash Flow $        5,57,000
Answer = Option C = $ 557,000

Note: Depreciation is a non cash expenses so add back to total income

jeff jeffy answered 1 year ago
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