In your first job with TBL Inc.your task is to consider a new project whose data are shown below.What is the project's Year 1 cash flow? $$\begin{array} { l r }
\text { Sales revenues } & \$ 22,250 \
\text { Depreciation } & \$ 8,000 \
\text { Other operating costs } & \$ 12,000 \
\text { Tax rate } & 25.0 \%
\end{array}$$
A) $9,115
B) $9,397
C) $9,688
D) $9,978
E) $10,277

Question

In your first job with TBL Inc.your task is to consider a new project whose data are shown below.What is the project's Year 1 cash flow? $$\begin{array} { l r } 
\text { Sales revenues } & \$ 22,250 \
\text { Depreciation } & \$ 8,000 \
\text { Other operating costs } & \$ 12,000 \
\text { Tax rate } & 25.0 \%
\end{array}$$
A) $9,115
B) $9,397
C) $9,688
D) $9,978
E) $10,277

Quizplus · Accepted Answer

Year 1 cash flow is calculated as: Sales revenues - Other operating costs - Taxes + Depreciation. Taxes are calculated on the operating income (Sales revenues - Other operating costs - Depreciation). So, operating income = $22,250 - $12,000 - $8,000 = $2,250. Taxes = $2,250 * 25% = $562.50. Cash flow = $22,250 - $12,000 - $562.50 + $8,000 = $9,687.50, which rounds to $9,688.

In Your First Job with TBL Inc A) $9,115 B) $9,397 C) $9,688 D) $9,978 E) $10,277

In Your First Job with TBL Inc A) $9,115
B) $9,397
C) $9,688
D) $9,978
E) $10,277