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Bennett Co. has a potential new project that is expected to generate annual revenues of $248,600,...

Bennett Co. has a potential new project that is expected to generate annual revenues of $248,600, with variable costs of $138,000, and fixed costs of $56,800. To finance the new project, the company will need to issue new debt that will have an annual interest expense of $17,000. The annual depreciation is $22,200 and the tax rate is 34 percent. What is the annual operating cash flow?

A. $43,056

B. $118,148

C. $167,412

D. $76,000

E. $44,348

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Answer #1
Tax rate 34%
Year-0 Year-1
Sale             248,600
Less: Operating Cost             138,000
Contribution             110,600
Less: Fixed Cost                56,800
Less: Depreciation as per table given below                22,200
Profit before tax               31,600
Tax                10,744
Profit After Tax               20,856
Add Depreciation                22,200
Cash Profit After tax               43,056

So option A is correct

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