You work for Whittenerg Inc., which is considering a new project whose data are shown below. What is the project's Year 1 cash flow?
A) $25,816
B) $27,175
C) $28,534
D) $29,960
E) $31,458

Question

You work for Whittenerg Inc., which is considering a new project whose data are shown below. What is the project's Year 1 cash flow? 
A) $25,816 
B) $27,175 
C) $28,534 
D) $29,960 
E) $31,458

Quizplus · Accepted Answer

Year 1 cash flow is calculated as follows: 
Operating cash flow = (Revenue - Cost - Depreciation) x (1 - Tax rate) 
= ($75,000 - $45,000 - $8,000) x (1 - 0.35) 
= $22,750 
Add back depreciation = $8,000 
Year 1 cash flow = $22,750 + $8,000 = $27,750. Therefore, the correct answer is B.

You Work for Whittenerg Inc