The owner of a bicycle repair forecasts revenues of $236,000 a year. Variable costs will be $69,000, and rental costs for the shop are $49,000 a year. Depreciation on the repair tools will be $29,000.

a.Prepare an income statement for the shop based on these estimates. The tax rate is 20%.

b.Calculate the operating cash flow for the repair shop using the three methods given below:

Now calculate the operating cash flow.

1. Dollars in minus dollars out.
2. Adjusted profits.
3. Add back depreciation tax shield.