The owner of a bicycle repair shop forecasts revenues of $212,000 a year. Variable costs will...
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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%. INCOME STATEMENT Revenue $ 212,000 Rental costs 43,000 Variable costs 63,000 Depreciation 23,000 Pretax profit 83,000 Taxes 33,200 Net income $ 49,800 b. Calculate the operating cash flow for the repair shop using the three methods given below. Now calculate the operating cash flow. i. Dollars in minus dollars out. ii. Adjusted accounting profits. iii. Add back depreciation tax shield. Methods of Calculation Dollars in Minus Dollars Out Adjusted Accounting profits After tax Operating Cash flow Operating Cash Flow 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%. INCOME STATEMENT Revenue $ 212,000 Rental costs 43,000 Variable costs 63,000 Depreciation 23,000 Pretax profit 83,000 Taxes 33,200 Net income $ 49,800 b. Calculate the operating cash flow for the repair shop using the three methods given below. Now calculate the operating cash flow. i. Dollars in minus dollars out. ii. Adjusted accounting profits. iii. Add back depreciation tax shield. Methods of Calculation Dollars in Minus Dollars Out Adjusted Accounting profits After tax Operating Cash flow Operating Cash Flow
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Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0078034640
7th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus
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