Proposed new project has projected sales of $124,000, costs of $58,000, and depreciation of $12,700. The tax rate is 34 percent. Calculate operating cash flow using the four different approaches

Please see explanation

Explanation:

The four different approaches for calculating operating cash flows are given as follows:

1.Operating cash flow=Earning before tax+ Depreciation expense – Tax expense

=($124,000-$58,000-$12,700)+$12,700-[($124,000-$58,000-$12,700)*34%]

=$53,300+$12,700-$18,122

=$47,878

2.Operating cash flow=Sales-expenses other than depreciation-Tax expense

=$124,000-$58,000-[($124,000-$58,000-$12,700)*34%]

=$124,000-$58,000-$18,122

=$47,878

3.Operating cash flow=(Sales-expenses other than depreciation)*(1-tax rate)+tax rate*depreciation

=($124,000-$58,000)*(1-0.34)+0.34*$12,700

=$43,560+$4,318

=$47,878

4.Operating cash flow=Net income+depreciation

=Sales-costs-depreciation-tax expense+depreciation

=$124,000-$58,000-$12,700-$18,122+$12,700

=$47,878

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