FIN/370 Lab Tutorial – Operating Cash Flow
Finance 370 Lab
(Calculate Operating Cash Flow) Assume a new project will generate annual revenue of 2,100,000, cash expenses (fixed and variable) of 1,300,000, while increasing depreciation by 215,000. The firm’s tax rate is 33%. Calculate operating cash flows for the project.
Step 1: Calculate EBIT with the formula Revenue – Cash Expenses
Step 2: Find taxes paid using the formula EBIT x Tax Rate
Step 3: Find Net Income using the formula EBIT – Taxes Paid
Step 4: Find Cash flow by using the formula Net Income + Depreciation
Solution: Cash Flow = 606,950