A project will generate sales of $52,900 each. The variable costs are $13,506 and the fixed...

A project will generate sales of $52,900 each. The variable costs are $13,506 and the fixed costs are $13,079. The project will use an equipment worth $111,251 that will be depreciated on a straight-line basis to a zero book value over a 9-year life of the project. If the tax rate is 23%, what is the operating cash flow?

Note: Enter your answer rounded off to two decimal points.

Expert Solution

Time(years)	0	1	2	3	4	5	6	7	8	9
Sales ($)		52900	52900	52900	52900	52900	52900	52900	52900	52900
Less: Fixed Cost($)		13079	13079	13079	13079	13079	13079	13079	13079	13079
Less: Variable Cost($)		13056	13056	13056	13056	13056	13056	13056	13056	13056
After tax Cashflow($)		20609.05	20609.05	20609.05	20609.05	20609.05	20609.05	20609.05	20609.05	20609.05
Investment($)	-111251
Depreciation($)		12361.22	12361.22	12361.22	12361.22	12361.22	12361.22	12361.22	12361.22	12361.22
Depreciation Tax shield($)		2843.08	2843.08	2843.08	2843.08	2843.08	2843.08	2843.08	2843.08	2843.08
Net Cashflow	-111251	23452.13	23452.13	23452.13	23452.13	23452.13	23452.13	23452.13	23452.13	23452.13

Net Cashflow = Depreciation Tax Shield + After Tax Cashflow + Investment

After Tax Cashflow = (Sales - Fixed cost - Variable cost)*(1-tax rate)

Depreciation Tax shield = Depreciation*tax rate

Operating Cashflow = Net Cashflow + Depreciation = 23452.13+12361.22 = $35813.35

jeff jeffy answered 2 years ago

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