The owner of a bicycle repair shop forecasts revenues of $212,000 a year. Variable costs will be $63,000, and rental costs for the shop are $43,000 a year. Depreciation on the repair tools will be $23,000.

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

Depreciation:

Variable costs:

Revenue:

Rental costs:

Pretax profit:

Taxes:

Net income:

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 accounting profits.
3. Add back depreciation tax shield.