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3 June, 19:33

Pompeii, Inc., has sales of $50,000, costs of $23,000, depreciation expense of $2,250, and interest expense of $2,000. If the tax rate is 23 percent, what is the operating cash flow, or OCF

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  1. 3 June, 20:13
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    operating cash flow = $21307.5

    Explanation:

    given data

    sales = $50,000

    costs = $23,000

    depreciation expense = $2,250

    interest expense = $2,000

    tax rate = 23 percent

    solution

    we get here operating cash flow for that

    EBIT = Sales - Costs - Depreciation ... 1

    EBIT = $50,000 - $23,000 - $2,250

    EBIT = $24750

    and taxes is

    taxes = tax rate * EBIT ... 2

    taxes = 0.23 * $24750

    taxes = $5692.5

    so here operating cash flow that is

    operating cash flow = EBIT + Depreciation - Taxes ... 3

    operating cash flow = $24750 + $2,250 - $5692.5

    operating cash flow = $21307.5
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