Question

Operating cash flow. The financial staff Cairo communications has identified the following information for the first year of the rollout of its new proposed service: project did sales $25 million, operating costs (Not including depreciation) $8 million, Depreciation $5 million and interest expense $4 million the company face is a 40% tax rate. What is the project is operating cash flow for the first year equals one? Write out your answer completely.

Answer 1

Cash generated or used through the normal course of business is the operating cash flow.

Calculation process:

Step 1) Net profit before tax should be calculated first.

Step 2) The amount of tax should be calculated at 40% rate.

Step 3) The formula should be used for the amount of operating cash flow.

Calculations:

Step 1) Net profit before tax = Sales – Operating cost – Depreciation – Interest expense

                                                = $25 million - $8 million - $5 million - $4 million

                                                = $8 million

Step 2) Amount of tax = Net profit before tax × Tax rate

                                    = $8 million × 40%

                                    = $3.2 million

Step 3) Operating cash flow = Net profit before tax + Depreciation + Interest expense – Amount of tax

                                                = $8 million + $5 million + $4 million - $3.2 million

                                                = $13.8 million

Answer: Net cash flow from operating activity is $13.8 million.