Question
Depreciation and accounting cash flow A firm has gathered the following data for its current year's operations.The firm has only one asset, which has a
Depreciation and accounting cash flow A firm has gathered the following data for its current year's operations.The firm has only one asset, which has a 3-year recovery period. The cost of the asset a year ago was $165000. The depreciation rate is 45%
Accruals - $12500
Current assets - 135,000
Interest expense - 13,550
sales revenue- 420,000
inventory- 82,300
Total costs before depreciation,interest, and taxes - 295,000
tax rate on ordinary income - 40%
a. Calculate the firm's operating cash flow for the current year
b. why is it important to add back noncash items such as depreciation when calculating cash flows?
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