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Marie's Fashions is considering a project that will require $30,000 in net working capital and $80,000...

Marie's Fashions is considering a project that will require $30,000 in net working capital and $80,000 in fixed assets. The project is expected to produce annual sales of $97,000 with associated costs of $58,000. The project has a 5-year life. The company uses straight-line depreciation to a zero book value over the life of the project. The tax rate is 30 percent. Calculate operating cash flow. (Do not include the dollar signs ($). Round your answers to the nearest whole dollar amount. (e.g., 32))

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Answer #1

Answer:

Operating Cash Flow = (Sales – Cost) * (1 – tax rate) + (Cost of Assets / No. of Useful Life) * tax rate
Operating Cash Flow = ($97,000 - $58,000) * (1 – 0.30) + ($80,000 / 5) * 0.30
Operating Cash Flow = $39,000 * 0.70 + $16,000 * 0.30
Operating Cash Flow = $27,300 + $4,800
Operating Cash Flow = $32,100

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