In: Finance
As assistant to the CFO of Boulder Inc., you must estimate the Year 1 cash flow for a project with the following data. What is the Year 1 cash flow? Do not round the intermediate calculations and round the final answer to the nearest whole number.
. Cash Sales revenues = $13,100
. Cash operating costs = $6,000
. Depreciation = $4,000
. Interest Expense = $1,400
. Tax rate = 35.0%
Computation of year 1 cash flow
Taxes expenses are included in cash flow. Tax expense is calculated on net income.
Cash sales revenue | $13,100 |
Less: Cash operating cost | $6,000 |
Less: Interest expense | $1,400 |
Less: Depreciation | $4,000 |
Net income=$13,100-$6,000-$1,400-$4,000 | $1,700 |
Tax expense = Net income * tax rate
= $1,700*35%
= $595
It means net of cash revenue minus cash expenses and taxes.
Cash sales revenue | $13,100 |
Less: Cash Operating Cost | $6,000 |
Less: Interest expense | $1,400 |
Less: Tax expense(see step 2 ) | $595 |
Year 1 cash Flow=$13,100-$6,000-$1,400-$595 | $5,105 |
Note: Depreciation is not included since it is a non-cash expense.
Therefore year 1 cash flow is equal to $ 5,105.
Therefore year 1 cash flow is equal to $ 5,105.