Calculate operating cash flow using the four different approaches described in the chapter and verify that the answer is the same in each case.
Calculate operating cash flow using the four different approaches described in the chapter and verify that the answer is the same in each case.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Please, I need help solving this problem(10.5).
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Transcribed Image Text:5. OCF from Several Approaches (LO3) A proposed new project has projected
sales of $164,000, costs of $87,000, and CCA of $15,200. The tax rate is 35%.
Calculate operating cash flow using the four different approaches described in
the chapter and verify that the answer is the same in each case.
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Step 1: Introduce the concept of operating cash flow.
VIEWStep 2: Specify the information given to us and Calculate Earnings Before Tax (EBT).
VIEWStep 3: 1st. Calculate operating cashflow using the most commonly used (normal) approach.
VIEWStep 4: 2nd. Calculate operating cashflow using the top-down approach.
VIEWStep 5: 3rd. Calculate operating cashflow using the tax-shield approach.
VIEWStep 6: 4th. Calculate operating cashflow using the bottom-up approach.
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