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Operating Cash Flow

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Operating Cash Flows. Laurel's Lawn Care, Ltd., has a new mower line that can generate revenues of $120,000 per year. Direct production costs are $40,000 and the fixed costs of maintaining the lawn mower factory are $15,000 a year. The factory originally cost $1 million and is being depreciated for tax purposes over 25 years using straight-line depreciation.

Calculate the operating cash flows of the project if the firm's tax bracket is 35
percent.

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Solution Summary

The solution explains how to calculate operating cash flow.

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The operating cash flow = net income + depreciation
Using straight line, the depreciation per year is 1,000,000/25=40,000
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