Exam #5 Chegg Study | Guided Solutio × × ezto mheducation.com/hm.t 90% search +

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Exam #5 Chegg Study | Guided Solutio × × ezto mheducation.com/hm.t 90% search + Most Visited Genting Stwted My USC Aken-Black The True Stery of Poca E connect DM 363 Bu Exam .5 (Comprehensive) Questicn 34 lol R0 34. H Cochran, Inc Is considering a new three-year expansion project that requres an itial fixed asset nwastment of $2 340,000 The fxed assel wil be deprecated straight ine to zero over its three-year tax irle, afar whech tme t wll be worthless. The proect es eslimaodgenerale S2230.00 'n annusi Sales, with costs ois1 220.000 l the tax rale is 40 percon what is he OCF fo t s pro ci Enter your amu er m salas nat milions OCF , dalai, , 28, n. po ro. ound ter te acu ation a o nul par no n o te aaret ti ne a

Explanation / Answer

As per the indirect method for calculation of cash flows,

cash flows = Net income+/-changes in assets and liabilities + non cash expenses.

As per the question sales= $2230000 and costs= $1220000

So, income = sales-costs= 2230000-1220000=1010000

Net income after tax = 1010000*60/100=$606000

calculation of depreciation

depreciation= cost of asset-salvage value/useful life of asset=2340000/3=$780000

So,operatin cash flows= net income after tax +depreciation(non cash expense)

=606000+780000=$1386000.

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