SpaceTech is considering a new project with the following projections for Year 2. Year 2 Projections
EBIT $400,000
Interest Expense $20,000
Depreciation Expense $40,000
Tax Rate 40%
Incremental Net Working
Capital Needs $200,000
Compute the operating cash flow for year 2.
A) $80,000
B) $180,000
C) $240,000
D) $280,000

Question

Quizplus · Accepted Answer

Operating cash flow = EBIT + Depreciation Expense - Interest Expense - Taxes + Incremental Net Working Capital Needs= $400,000 + $40,000 - $20,000 - ($400,000 x 40%) + $200,000= $400,000 + $40,000 - $20,000 - $160,000 + $200,000= $460,000 - $180,000= $280,000

SpaceTech Is Considering a New Project with the Following Projections