Depreciation and accounting cash flowA firm in the third year of depreciating its only asset, which originally cost

$184,000

and has a 5-year MACRS recovery period

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, has gathered the following data relative to the current year's operations:

Accruals	$14,400
Current assets	111,000
Interest expense	14,700
Sales revenue	404,000
Inventory	70,200
Total costs before depreciation, interest and taxes	291,000
Tax rate on ordinary income	21%

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.

a. Complete the following table to determine the operating cash flow (OCF):(Round to the nearest dollar.)

Operating Cash Flow
Sales revenue	$
Less: Total costs before depreciation, interest, and taxes
Depreciation expense
Earnings before interest and taxes	$
Less: Taxes at 21%
Net operating profit after taxes (NOPAT)	$
Plus: Depreciation
Operating Cash Flow (OCF)	$

b. Explain the impact that depreciation, as well as any other noncash charges, has on a firm's cash flows.(Select from the drop-down menu.)

Depreciation and other noncash charges serve as a tax shield against income, (increasing/decreasing)annual cash flow.