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4 May, 13:56

Ben's Border Café is considering a project which will produce sales of $16,000 and increase cash expenses by $10,000. If the project is implemented, taxes will increase from $23,000 to $24,500 and depreciation will increase from $4,000 to $5,500. What is the amount of the operating cash flow using the top-down approach?

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  1. 4 May, 15:17
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    the amount of the operating cash flow using the top-down approach is $4.500

    Explanation:

    operating cash flow using the top-down approach

    operating cash flow = Sales - increase cash expenses - increase in tax

    =16000-10000 - (24500-23000)

    =$ 4500

    Note:increase cash expenses and increase in tax are cash outflow. Depreciation has not been considered as it is a non cash expenditure.
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