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% 12% 12% 5% 10 years 10% 18% 14% 7% OVOUWN 6% 11 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. Depreciation and accounting cash flow A firm in the third year of depreciating its only asset, which originally cost $180,000 and has a 5-year MACRS recovery period has gathered the following data relative to the current year's operations: Accruals Current assets Interest expense Sales revenue Inventory Total costs before depreciation, interest and taxes Tax rate on ordinary income $14,900 116,000 16,000 410,000 69,000 286,000 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 charaes, 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)