Schiller Construction Inc.has estimated the following revenues and expenses related phase I of a proposed new housing development? Incremental sales= $5,000,000,total cash expenses $3,500,000,depreciation $500,000,taxes 35%,interest expense,$200,000.Operating cash flow equals

Question

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Operating Income = Incremental sales - Cash expenses - Depreciation
Operating Income = $5,000,000 - $3,500,000 - $500,000
Operating Income = $1,000,000

Taxes = 35% × Operating Income
Taxes = 0.35 × $1,000,000
Taxes = $350,000

Operating Cash Flow = Operating Income - Taxes - Interest Expense
Operating Cash Flow = $1,000,000 - $350,000 - $200,000
Operating Cash Flow = $450,000

Therefore, the operating cash flow for phase I of the proposed new housing development is $1,150,000.