Question

Laurel’s Lawn Care Ltd., has a new mower line that can generate revenues of $171,000 per year. Direct production costs are $57,000, and the fixed costs of maintaining the lawn mower factory are $23,500 a year. The factory originally cost $1.14 million and is being depreciated for tax purposes over 20 years using straight-line depreciation. Calculate the operating cash flows of the project if the firm’s tax bracket is 25%. (Enter your answer in dollars not in millions.)

Answer 1

OCF

82125

Revenues	171000
Less: Production cost	57000
Fixed costs	23500
Depreciation	57000
Profit before tax	33500
Less:Tax	8375
Net Income	25125
Add Depreciation	57000
OCF	82125

AutoSave OH 2 H Book1 - Excel File Home Insert Draw Page Layout Formulas Data Review View Tell me what you want to do D -A = = = Calibri - 11 BIU - Font A A- Help . - General $ -% Sign in - 0 Share Comme insert - E47 Delete- Format . Sort &. Find & Filter - Select - Cells Editing Paste Conditional Format as Formatting - Table Styles Cell Styles Clipboard Alignment Number L10 H Revenues Less: Production cost Fixed costs Depreciation Profit before tax Less:Tax Net Income Add Depreciation OCF 171000 57000 23500 =1140000/20 =12-SUM(13:15) =16 25% =16-17 =15 =19+18