Purchase Solution

Effect of depreciation on operating cash flow

Not what you're looking for?

Ask Custom Question

Please see the attached file.

You are analyzing a project and have developed the following estimates. The depreciation is $7,600 a year and the tax rate is 34 percent. What is the worst case operating cash flow?

Attachments
Purchase this Solution

Solution Summary

This solution illustrates how to compute the effect of depreciation on operating cash flow in analyzing a project.

Solution Preview

We can test all three cases to see which produces the lowest taxable income:

Taxable income/(loss) = (Units sold*(sales price/unit - variable cos/unit))-fixed cost-depreciation
Best case taxable income/(loss) = (3,100*($19-$12))-$8,200-$7,600
Best case taxable income/(loss) = (3,100*$7)-$15,800
Best case taxable income/(loss) = $21,700 - $15,800
Best case taxable income/(loss) = ...

Purchase this Solution


Free BrainMass Quizzes
Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Basics of corporate finance

These questions will test you on your knowledge of finance.

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.