Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Answer without using excel and minimize shortcuts including the use if a financial calculator. Please show all work Q5) A proposed new project has projected

image text in transcribed

Answer without using excel and minimize shortcuts including the use if a financial calculator. Please show all work

Q5) A proposed new project has projected sales of $108,000, costs of $51,000, and CCA of $6,800. The tax rate is 35%. Calculate operating cash flow using the four different approaches described in the chapter and verify that the answer is the same in each case. Answer: To calculate the operating cash flow (OCF), we first need to calculate net income. The income statement is: Using the most common financial calculation for operating cash flow (OCF), we get OCF=EBIT+Depreciation-Taxes= The top-down approach to calculating OCF yields: OCF=SalesCostsTaxes= The tax-shield approach is: OCF=(SalesCosts)(1Tc)+TcDepreciation= Tc= Corporate tax rate And the bottom-up approach is: OCF=Netincome+Depreciation= All four methods of calculating OCF should always give the same

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Laymans Guide To Managing Your Investments

Authors: Thomas Dunleavy

1st Edition

979-8763592214

More Books

Students also viewed these Finance questions