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

Question

Quizplus · Accepted Answer

Operating cash flow = (incremental sales - cash operating expenses - depreciation) x (1 - tax rate) + depreciation

= ($5,000,000 - $3,500,000 - $500,000) x (1 - 0.35) + $500,000

= $1,000,000 x 0.65 + $500,000

= $650,000 + $500,000

= $1,150,000