Depreciation and accounting cash flowA firm in the third year of depreciating its only asset, which originally cost $173,000 and has a 5-year MACRS recovery period

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

Accruals	$15,300
Current assets	117,000
Interest expense	15,200
Sales revenue	413,000
Inventory	69,600
Total costs before depreciation, interest and taxes	297,000
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)	$

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

Depreciation and other noncash charges serve as a tax shield against income, (INCREASE OR DECREASE) annual cash flow.

(Click on the icon located on the top-right corner of the data table below in order to copy its contents 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 33% 20% 14% 45% 32% 25% 15% 19% 18% 7% 12% 12% 12% 10 years 10% 18% 14% 12% 9% OVO AWN- 6% 6% 6% 4% Totals 100% 100% 100% 100% *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