In the third year after depreciating its only asset with an initial cost, the firm $185 comma 000 $ 185,000 and has a 5-year MACRS recovery period

It has collected the following data regarding the current year's activities:

accruals	$14.200$
current assets	$123,000
interest expense	$ 14.100
sales revenue	$ 406,000
Inventory	$ 70.600
Total costs before depreciation, interest and taxes	$ 290.000
Ordinary income tax rate	40%

A. Use relevant data to determine operating cash flow for the current year.

B. Explain the effect of depreciation and other non-cash charges on a firm's cash flows.

Depreciation Percentages Rounded By Recovery Year
Top Four Attribute Classes

Percentage by year of recovery*

recovery year

3 years

5 years

7 years

10 years

1

33%

20%

14%

10%

2

45%

32%

25%

18%

3

15%

19%

18%

14%

4

7%

12%

12%

12%

5

12%

9%

9%

6

5%

9%

8%

7

9%

7%

8

4%

6%

9

6%

10

6%

11

4%

totals

100%

100%

100%

100%

Business Cash Flow
sales revenue	$
Minus: Total costs before depreciation, interest and taxes
depreciation expense
Earnings excluding interest and taxes	$
Minus: 40% taxes
Net operating profit after tax (NOPAT)	$
Plus: Depreciation
Operating Cash Flow (OCF)	$

Answer rating: 100% (QA)

A Operating cash flow for the current year can be established by firstly calculating the Earnings Be... View the full answer