Question

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.

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%

Solutions

Expert Solution

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.

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