Question

1. You work for Whitteberg Inc., which is considering a new project whose data is shown below. What is the project’s Year 1 cash flow?

Sales revenues, each year                                  $62,500

Depreciation                                                     $ 12,000

Other operating costs                                        $25,000

Interest expense                                               $  8,000

Tax rate                                                                35.0%

Answer 1

Statement showing Cash flow for year 1

Particulars	Amount
Sales	62500
Less
Other operating cost	25000
Depreciation	12000
PBT	25500
Tax @ 35%	8925
PAT	16575
Add: Depreciation	12000
Annual cash flow	28575

Thus cash flow for year 1 = $28575

Note: Interest expense should not be consider as it will be considered in discount rate