Marie's Fashions is considering a project that will require $28,000 in net working capital and $87,000 in fixed assets. The project is expected to produce annual sales of $75,000 with associated cash costs of $57,000. The project has a 5-year life. The company uses straight-line depreciation to a zero book value over the life of the project. The tax rate is 30 percent. What is the operating cash flow for this project?
OCF = ($75,000 - $57,000)(1 - 0.30) + ($87,000/5)(0.30) = $17,820
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57.
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The Beach House has sales of $784,000 and a profit margin of 8 percent. The annual depreciation expense is $14,000. What is the amount of the operating cash flow if the company has no long-term debt?
OCF = ($784,000 × 0.08) + $14,000 = $76,720
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58.
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The Pancake House has sales of $1,642,000, depreciation of $27,000, and net working capital of $218,000. The firm has a tax rate of 35 percent and a profit margin of 6 percent. The firm has no interest expense. What is the amount of the operating cash flow?
OCF = ($1,642,000 × 0.06) + $27,000 = $125,520
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59.
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Northern Railway is considering a project which will produce annual sales of $975,000 and increase cash expenses by $848,000. If the project is implemented, taxes will increase from $141,000 to $154,000 and depreciation will increase from $194,000 to $272,000. The company is debt-free. What is the amount of the operating cash flow using the top-down approach?
OCF = $975,000 - $848,000 - ($154,000 - $141,000) = $114,000
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