Burbank Construction 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 can be calculated using the following formula:

Cash flow = Incremental sales - Total cash operating expenses - Depreciation

Cash flow = $5,000,000 - $3,500,000 - $500,000

Cash flow = $1,000,000

Next, we need to calculate the taxes and interest expense:

Taxes = 35% * ($1,000,000 - $500,000)

Taxes = $175,000

Operating cash flow = Cash flow - Taxes - Interest expense

Operating cash flow = $1,000,000 - $175,000 - $200,000

Operating cash flow = $625,000

Therefore, the correct answer is C.

Burbank Construction Has Estimated the Following Revenues and Expenses Related