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### A company is considering investing in a piece of machinery which will.docx

1. A company is considering investing in a piece of machinery which will cost \$550,000. It will provide an additional \$160,000 in sales each year and its annual operating expenses are expected to be \$52,000. The machine will be depreciated on a straight-line basis over a 10-year life with no estimated salvage value. The company has a 40% tax rate. What is the annual operating cash flow? \$64,800 \$96,000 \$86,800 \$118,000 Some other answers Solution Answer is \$86,800. Calculations given below: First we will calculate profit after tax (PAT) and then add back non cash expenses that is depreciation etc to get operating cash flow for an year: Now, we calculate operating cash as below: Calculation of profit after tax Sales 160000 Operating expenses -52000 Depreciation -55000 Machinery cost over 10 years PBT 53000 tax@40% -21200 PAT 31800
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