A project will reduce costs by $37,000 but increase depreciation by $17,300. What is the operating...

Question

Question

A project will reduce costs by $37,000 but increase depreciation by $17,300. What is the operating cash flow if the tax rate is 40%?

A) $29,120

B) $22,200

business finance

Answer 1

Answer #1

Answer: Option A is correct.

Operating Cash Flow = After Tax Cost Savings + Depreciation Tax Shield
=(Reduce costs)*(1-tax rate) + (Depreciation)*(Tax rate)

= 37000*(1-40%) + 17300*40%
= 22200+6920
=29120

So, the answer is $29120

Answer 2

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