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23 March, 22:47

The following information for Towsontown, Inc. is provided: Net Sales: $88,000 Operating Costs: $72,000 (doesn't include depreciation) Depreciation Expense: $ 7,200 (no amortization charges occurred) Debt: $40,000 Interest Rates: 10% Annual Tax Rate: 34% How much net cash flow did Woodley generate over the past year? a. $3,168 b. $3,268 c. $10,168 d. $10,368 e. $11,368

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  1. 24 March, 01:59
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    Answer: d. $10,368

    Explanation:

    We can Calculate net cash flows by calculating Net Income and then add/subtract non cash items like depreciation, accrued income etc.

    Net Income Calculation

    Net Income = $88000

    Operating Costs = $72000

    Depreciation = $7200

    interest expense = $40000 x 10% = $4000

    Net profit before Tax = 88000 - 72000 - 7200 - 4000 = 4800

    income Tax expense = 4800 x 34/100 = 1632

    Net income = 4800 - 1632 = $ 3168

    Net Cash Flows = Net Income + Depreciation

    Net Cash Flows = $3168 + $7200 = $10368
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Home » Business » The following information for Towsontown, Inc. is provided: Net Sales: $88,000 Operating Costs: $72,000 (doesn't include depreciation) Depreciation Expense: $ 7,200 (no amortization charges occurred) Debt: $40,000 Interest Rates: 10% Annual Tax
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