Accruals Current assets Interest expense Sales revenue A firm in the third year of depreciating its...
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Accruals Current assets Interest expense Sales revenue A firm in the third year of depreciating its only asset, which originally cost $173,000 and has a 5-year MACRS recovery period $15.400 116,000 15.400 Inventory Total costs before depreciation, interest and taxes Tax rate on ordinary income 414,000 70,300 291,000 40% 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 charges, 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 40% Net operating profit after taxes (NOPAT) Plus Depreciation Operating Cash Flow (OCF) More info (Click on the icon here in order to copy the contents of the data table below into a spreadsheet) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Recovery year 1 2 3 4 6 7 8 9 10 11 Totals 3 years 33% 45% 15% 7% Percentage by recovery year 5 years 20% 32% 19% 12% 12% 5% 7 years 14% 25% 18% 12% 9% 9% 9% 4% 10 years 10% 18% 14% 12% 9% 8% 7% 6% 6% 6% 4% 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. Accruals Current assets Interest expense Sales revenue A firm in the third year of depreciating its only asset, which originally cost $173,000 and has a 5-year MACRS recovery period $15.400 116,000 15.400 Inventory Total costs before depreciation, interest and taxes Tax rate on ordinary income 414,000 70,300 291,000 40% 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 charges, 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 40% Net operating profit after taxes (NOPAT) Plus Depreciation Operating Cash Flow (OCF) More info (Click on the icon here in order to copy the contents of the data table below into a spreadsheet) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Recovery year 1 2 3 4 6 7 8 9 10 11 Totals 3 years 33% 45% 15% 7% Percentage by recovery year 5 years 20% 32% 19% 12% 12% 5% 7 years 14% 25% 18% 12% 9% 9% 9% 4% 10 years 10% 18% 14% 12% 9% 8% 7% 6% 6% 6% 4% 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.
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Answer rating: 100% (QA)
To determine the operating cash flow OCF for the current year we need to calculate the relevant values based on the given data Sales revenue 414000 To... View the full answer
Related Book For
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
Posted Date:
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