Question

The blank has the options (net income or net cash flow)

3. Net cash flow You are Olivia, a financial analyst who works for an investment bank in downtown Denver, Colorado You are analyzing the current cash condition of CansAndString Telecomm. You've collected the following information from the company's financial reports: • The company just reported net sales of $5,000,000. Assume that there are no noncash sales. • The operating costs (excluding depreciation and amortization) are 65% of the company's total revenues. • Its depreciation and amortization charges are 5% of total sales. • The interest charges are 15% of EBIT, and it pays a 40% tax rate. reflects the true cash position of the company, and can differ from the balance that reflects the money that the business is left with after paying its operating expenses, interest expense, and taxes. In the case of 2CansAndString Telecomm, the company's current net cash flow isi $1,015,000 O $765,000 O $1,275,000 $505,600

Answer 1

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Answer:

We calculate the net income using income statment

Sales Op Cost EBITDA Depreciation EBIT Interest $ 5,000,000 $ 3,250,000 5000000*0.65 $ 1,750,000 $ 250000 5000000*0.05 $ 1,500000 $ 225000 0.15*1500000 $ 1,275000 $ 510000 1275000*0.40 $ 765000 PBT Taxes

Now net cash flow = NI + Deprciation = $765+$250 = $1,015,000 (Option A)