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Take a Test -Oshayne Whittingham-Google Chrome Secure https//www.mathxil.com/Student/PlayerTest.aspx?testld-174196155& centerwinayes Oshayne Principles of Business Finance Test: Exam 3 58 of 60 This Question: 1 pt Tully's Tool and Die has the following projections for Year 1 of a capital budgeting project Year 1 Incremental Projections Sales Variable Costs Fixed Costs $400,000 $240,000 80,000 $40,000 35% Depreciation Expense Tax Rate Calculate the operating cash low for Year 1 O A. $26,000 O B. $38,200 O C. $66,000 OD $40.000 o sevect your answer

Explanation / Answer

Answer is C.

Sales = $400,000
Variable Costs = $240,000
Fixed Costs = $80,000
Depreciation Expense = $40,000
tax rate = 35%

Operating Cash Flow = Net Income + Depreciation
Operating Cash Flow = (Sales - Variable Costs - Fixed Costs - Depreciation)*(1 - tax) + Depreciation
Operating Cash Flow = ($400,000 - $240,000 - $80,000 - $40,000)*(1 - 0.35) + $40,000
Operating Cash Flow = $40,000*0.65 + $40,000
Operating Cash Flow = $66,000

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