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Problem 9-7 Calculating Cash Flows (LO2) The owner of a bicycle repair shop forecasts revenues of $192,000 a year. Variable costs will be $58,000, and
Problem 9-7 Calculating Cash Flows (LO2) The owner of a bicycle repair shop forecasts revenues of $192,000 a year. Variable costs will be $58,000, and rental costs for the shop are $38,000 a year. Depreciation on the repair tools will be $18,000. a. Prepare an income statement for the shop based on these estimates. The tax rate is 20%. INCOME STATEMENT $ 0 b. Calculate the operating cash flow for the repair shop using the three methods given below: Now calculate the operating cash flow. i. Dollars in minus dollars out. ii. Adjusted accounting profits. lii. Add back depreciation tax shield. Methods of Calculation Operating Cash Flow i. Dollars in Minus Dollars Out II. Adjusted Accounting profits ili. After tax Operating Cash flow
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