Revenues generated by a new fad product are forecast as follows:   Year Revenues 1 $26,145 2 40,000 3 20,000 4 10,000 Thereafter 0   Expenses are expected to be 50% of revenues, and working capital required in each year is expected to be 20% of revenues in the following year. The product requires an immediate investment of $40,000 in plant and equipment that will be depreciated using the straight-line method over 5 years.  The firm recently spent $2,000 on a study to estimate the revenues of the new product.  The tax rate is 20%.  What is the operating cash flow in year 1?  Answer to nearest whole dollar amount.

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.