Given the following partial income statement data during project life. Tax rate

Question

Given the following partial income statement data during project life.

Tax rate is 30.00 percent. No fixed assets are purchased during the year. Assume that only components of new operating working capital are as follows:

Based on this information, what is the operating cash flow for each year?

I calculate cash inflows from each year and get

and NOWC

The answers are 186,000 263,000 281,000

Could you please explain why?

Because I thought the operating cash flow for year 1 should be cash inflow +/- change in NOWC which is (sales - cash cost - depreciation)x0.7 + depreciation + (84,000 - 59,000)

and operating cash flow for year 2 should be  (292,000) + (113,000 - 84,000) = 321,000

usd year 2 year 3 year 4 sales 500,000 750,000 870,000 cash cost 250,000 410,000 520,000 depreciation 120,000 180,000 210,000

Explanation / Answer

Particulars Year2 Year3 Year4 sales 500,000 750,000 870,000 cash cost 250,000 410,000 520,000 depreciation 120,000 180,000 210,000 Profit       130,000.00                                 160,000.00    140,000.00 Tax@30%         39,000.00                                   48,000.00       42,000.00 Profit after tax         91,000.00                                 112,000.00       98,000.00 Add : depreciation 120,000 180,000 210,000 Cash flows after tax       211,000.00                                 292,000.00    308,000.00 Less : inc in cash and add dec in cash         (1,000.00)                                   (1,000.00)       (2,000.00) Less : inc in A/R and add dec in A/R         (4,000.00)                                   12,000.00       (5,000.00) Less : dec in A/P and add inc in A/P         20,000.00                                   10,000.00       40,000.00 Less : inc in inv and add dec in inv       (40,000.00)                                 (50,000.00)    (60,000.00) Operating Cash Flows       186,000.00                                 263,000.00    281,000.00 Working Notes usd year 1 year 2 Diff year 2 year 3 Diff year 3 year 4 Diff Minimum cash        8,000.00                            9,000.00      (1,000.00)       9,000.00       10,000.00       (1,000.00)       10,000.00    12,000.00    (2,000.00) Accounts Receivable       21,000.00                          25,000.00      (4,000.00)     25,000.00       13,000.00       12,000.00       13,000.00    18,000.00    (5,000.00) Account Payable       60,000.00                          80,000.00    (20,000.00)     80,000.00       90,000.00      (10,000.00)       90,000.00 130,000.00 (40,000.00) Inventory       90,000.00                        130,000.00    (40,000.00) 130,000.00     180,000.00      (50,000.00)     180,000.00 240,000.00 (60,000.00)

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