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Assume that a new project will annually generate revenues of $2,000,000. Cash expenses including both fixed and variable costs will be $800,000, and depreciation will be $200,000 per year. In addition, let's assume that the firm's marginal tax rate is 34 percent. Calculate the operating cash 4 flows. 6 DATA 7 Revenues 8 Cash expenses 9-Annual depreciation 10 Tax rate S2,000,000 $800,000 S200,000 34% 12 SOLUTION 13 Net Profit: 14 Revenues 15 Cash expenses 16 Depreciation 17 EBIT 18 Taxes 19 Net income 20 21 Operating Cash Flows: 22 Change in EBIT 23 Change in taxes 24 Change in depreciation 25 Operating cash flows 26 200,000 S1,000,000 340,000 S660,000