Question

In: Finance

Simco is looking at a project that will require $80,000 in net working capital and $200,000...

Simco is looking at a project that will require $80,000 in net working capital and $200,000 in fixed assets. The project is expected to produce annual sales of $150,000 with associated costs of $100,000. The project has a 10-year life. The company uses straight-line depreciation to a zero book value over the life of the project. The tax rate is 35 percent. What is the annual operating cash flow for this project?

Group of answer choices

$150,000

$46,000

$39,500

$50,000

-$240,500

Solutions

Expert Solution

Depreciation = 200,000 / 10

= 20,000

Statement of Operating Cash Flow
Particulars Amount
Sales                    150,000
Less: Associated Cost                    100,000
Operating Income                       50,000
Less: Depreciation                       20,000
EBIT                       30,000
Less: Tax (30,000 * 35%)                       10,500
EAT / PAT                       19,500
Add: Depreciation                       20,000
Operating Cash Flow                       39,500

Option C is correct

jeff jeffy answered 1 year ago
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