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Depreciation and accounting cash flow A firm in the third year of depreciating its only asset, which originally cost $183,000 and has a 5-year MACRS recovery period, has gathered the following data relative to the current year's operations: Accruals Current assets $15,600 124,000 - Interest expense Sales revenue Inventory 15,900 419,000 70,300 More info Total costs before depreciation, interest and taxes Tax rate on ordinary income 300,000 40% a. Use the relevant data to determine the operating cash flow for the current year. b. Explain the impact that depreciation, as well as any other noncash charges, has on a firm's cash flows. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year* Recovery year 3 years 5 years 7 years 10 years 1 33% 20% 14% 10% 2 45% 32% 25% 18% a. Complete the following table to determine the operating cash flow (OCF): (Round to the nearest dollar.) 3 15% 19% 18% 14% 4 7% 12% 12% 12% Operating Cash Flow 5 12% 9% 9% Sales revenue $ 6 5% 9% 8% 7 9% 7% Less: Total costs before depreciation, interest, and taxes 8 4% 6% 6% Depreciation expense 9 10 6% Earnings before interest and taxes 11 4% Less: Taxes at 40% Totals 100% 100% 100% 100% Net operating profit after taxes (NOPAT) $ Plus: Depreciation Operating Cash Flow (OCF) S *These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance (200%) depreciation using the half-year convention. Print Done