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Cash Flow for the Year

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A new project will generate sales of $74.5 million, costs of $42.5 million, and depreciation expense of $10.5 million in the coming year. The firm's tax rate is 30%.

a. Calculate cash flow for the year by using all three methods: (a) adjusted accounting profits; (b) cash inflow/cash outflow analysis; and (c) the depreciation tax shield approach. (Enter your answers in millions rounded to 2 decimal places.)

Method Cash Flow
Adjusted accounting profits $_________ million
Cash inflow/cash outflow analysis $_________ million
Depreciation tax shield approach $_________ million


b. Are the above answers equal?


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Solution Preview

Adjusted accounting profits
Profit before taxes = Sales-Costs-Depreciation expenses
=$21.5 mn
Profit ...

Solution Summary

Solution discusses cash flow for the year by using all three methods