Question

Operating cash flow. Grady Precision Measurement Tools has forecasted the following sales and costs for a new GPS system: annual sales of 40,000 units at $20 a unit, production costs at 37% of sales price, annual fixed costs for production at $160,000, and straight-line depreciation expense of $215,000 per year. The company tax rate is 38%. What is the annual operating cash flow of the new GPS system? What is the annual operating cash flow of the new GPS system? (Round to the nearest doillar.)

Answer 1

Solution :

The annual operating cash flow of the new GPS system = $ 294,980

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.

FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW Statement showing the calculation of the annual operating cash flow of the new GPS system Sl.No. Particulars Cash Flow 1 Sale Price per unit 20.00 2 Less: Production cost @ 37% of sales | $ 7.40 -S20 * 37%-$7.4 3 Contribution per unit (1) (2 4 Annual Sales 5 Total contribution - (3) * (4) 4 12.60 $ 12.60 * 40000 $504,000.00 6 Less : Annual Fixed cost of production$160,000.00 $-215,000.00 $129,000.00 49,020.00 79,980.00 $215,000.00 $294,980.00 71 Less : Depreciation 8 Earnings before Tax 9| Less : Tax @ 38%-(8) * 0.38 10 Net Income 11 Add back Depreciation 12 Annual operating cash flow 10 12 13 15 16