Projected Sales: $18 million Operating Costs (not including depreciation): $9 million Depreciation: $4 million Interest Expense:...
Projected Sales: $18 million
Operating Costs (not including depreciation): $9 million
Depreciation: $4 million
Interest Expense: $3 million
Tax rate= 40%
What is the project's operating cash flow for the first year?
Homework Answers
EBIT = Sales - Operating Costs - Depreciation
EBIT = $18,000,000 - $9,000,000 - $4,000,000
EBIT = $5,000,000
Taxable Income = EBIT - Interest Expense
Taxable Income = $5,000,000 - $3,000,000
Taxable Income = $2,000,000
Taxes = Taxable Income * Tax Rate
Taxes = $2,000,000 * 40%
Taxes = $800,000
Net Income = Taxable Income - Taxes
Net Income = $2,000,000 - $800,000
Net Income = $1,200,000
Method 1:
Operating Cash Flow = EBIT - Taxes + Depreciation
Operating Cash Flow = $5,000,000 - $800,000 + $4,000,000
Operating Cash Flow = $8,200,000
Method 2:
Operating Cash Flow = Net Income + Depreciation
Operating Cash Flow = $1,200,000 + $4,000,000
Operating Cash Flow = $5,200,000
Add Answer to:
Projected Sales: $18 million
Operating Costs (not including depreciation): $9 million
Depreciation: $4 million
Interest Expense:...
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