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What is a project's Year 1 cash flow based on the data shown below? Annual sales revenues $50,000 Depreciation $9,000 Operating costs, excluding depreciation $18,000 Interest expense $7,000Tax rate40% A
What is a project's Year 1 cash flow based on the data shown below?
Annual sales revenues $50,000
Depreciation $9,000
Operating costs, excluding depreciation $18,000
Interest expense $7,000Tax rate40%
A. $22,000
B. $22,800
C. $27,400
D. $30,000
E. None of the above
Expert Solution
Particulars Amount
Annual Sales Revenue = 50,000
Less: Operating Costs, Excluding Depreciation = 18,000
Depreciation = 9,000
Interest Expenses 7,000
Net Profit Before Tax =$16,000
Less : Taxation @ 40% =$6,400
Net Profit After Tax =$9,600
Add: Depreciation of the year =$9,000
Annual Cash Flow = $18,600
Option E. is correct. None of the above
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