Ronnie's Coffee House is considering a project which will produce sales of $6,000 and increase cash expenses by $2,500. If the project is implemented, taxes will increase by $1,300. The additional depreciation expense will be $1,000. An initial cash outlay of $2,000 is required for net working capital. What is the amount of the operating cash flow using the top-down approach?
A) $2,000
B) $1,500
C) $2,200
D) $3,500
E) $4,200

Question

Quizplus · Accepted Answer

The operating cash flow is calculated as follows:Sales: $6,000Less: Cash expenses: $2,500Less: Taxes: $1,300Less: Depreciation: $1,000Plus: Net working capital: $2,000Operating cash flow: $2,200

Ronnie's Coffee House Is Considering a Project Which Will Produce