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School

Liberty University *

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Course

530

Subject

Finance

Date

Feb 20, 2024

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Pages

1

Uploaded by ProfOkapiPerson648

Report
Tubby Toys estimates that its new line of rubber ducks will generate sales of $6.00 million, operating costs of $3.00 million, and a depreciation expense of $0.20 million. If the tax rate is 30%, what is the firm’s operating cash flow? Note: Do not round your intermediate calculations. Enter your answer in millions rounded to 2 decimal places. Firm's operating cash flow |$ 2.16 Q |million Explanation Some values below may show as rounded for display purposes, though unrounded numbers should be used for actual calculations. Net income = ($6.00 $3.00 - $0.20) - [0.30 x ($6.00 - $3.00 - $0.20)] = $2.80 - $0.84 = $1.96 million Three Methods for determining operating cash flow: 1. Revenues cash expenses taxes paid = $3.00 - $0.84 = $2.16 million 2. After-tax profit + depreciation = $1.96 + $0.20 = $2.16 million 3. (Revenues - cash expenses) x (1 tax rate) + (depreciation x tax rate) = ($3.00 x 0.70) + ($0.20 x 0.30) = $2.16 million
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