A corporation has annual sales of $1,500,000 and costs of $698,000 in the first year. A plant is installed at a cost of $1,200,000. It will be depreciated straight line to zero in its useful life of 4 years. The tax rate is 35%. Calculate the operating cash flow for the first year.

A corporation has annual sales of $1,500,000 and costs of $698,000 in the first year. A plant is installed at a cost of $1,200,000. It will be depreciated straight line to zero in its useful life of 4 years. The tax rate is 35%. Calculate the operating cash flow for the first year.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A corporation has annual sales of $1,500,000 and costs of $698,000 in the first year. A
plant is installed at a cost of $1,200,000. It will be depreciated straight line to zero in its
useful life of 4 years. The tax rate is 35%. Calculate the operating cash flow for the first
year.

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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