As a member of UA Corporation's financial staff,you must estimate the Year 1 cash flow for a proposed project with the following data.What is the Year 1 cash flow? Do not round the intermediate calculations and round the final answer to the nearest whole number. $$\begin{array} { l r }
\text { Sales revenues, each year } & \$ 36,750 \
\text { Depreciation } & \$ 10,000 \
\text { Other operating costs } & \$ 17,000 \
\text { Interest expense } & \$ 4,000 \
\text { Tax rate } & 35.0 \%
\end{array}$$
?

Question

As a member of UA Corporation's financial staff,you must estimate the Year 1 cash flow for a proposed project with the following data.What is the Year 1 cash flow? Do not round the intermediate calculations and round the final answer to the nearest whole number. $$\begin{array} { l r } 
\text { Sales revenues, each year } & \$ 36,750 \
\text { Depreciation } & \$ 10,000 \
\text { Other operating costs } & \$ 17,000 \
\text { Interest expense } & \$ 4,000 \
\text { Tax rate } & 35.0 \%
\end{array}$$
?

Quizplus · Accepted Answer

To calculate the Year 1 cash flow, we first need to determine the operating income before tax, then subtract taxes, and finally add back depreciation (since it's a non-cash expense). The calculation is as follows:1. Operating Income Before Tax = Sales Revenues - Other Operating Costs - Depreciation = $36,750 - $17,000 - $10,000 = $9,750.2. Taxes = Operating Income Before Tax * Tax Rate = $9,750 * 35% = $3,412.5.3. Net Operating Income After Tax = Operating Income Before Tax - Taxes = $9,750 - $3,412.5 = $6,337.5.4. Cash Flow = Net Operating Income After Tax + Depreciation = $6,337.5 + $10,000 = $16,337.5.Rounded to the nearest whole number, the Year 1 cash flow is $16,338.

As a Member of UA Corporation's Financial Staff,you Must Estimate