The owner of a bicycle repair shop forecasts revenues of $160,000 a year. Variable costs will be $50,000, and rental costs for the shop are $30,000 a year. Depreciation on the repair tools will be $10,000. a. Prepare an income statement for the shop based on these estimates. The tax rate is 20%. b. Calculate the operating cash flow for the repair shop using the three methods given below: Dollars in minus dollars out. Adjusted accounting profits. Add back depreciation tax shield.
The owner of a bicycle repair shop forecasts revenues of $160,000 a year. Variable costs will be $50,000, and rental costs for the shop are $30,000 a year. Depreciation on the repair tools will be $10,000. a. Prepare an income statement for the shop based on these estimates. The tax rate is 20%. b. Calculate the operating cash flow for the repair shop using the three methods given below: Dollars in minus dollars out. Adjusted accounting profits. Add back depreciation tax shield.
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 5EB: A grocery store is considering the purchase of a new refrigeration unit with an Initial Investment...
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The owner of a bicycle repair shop
a. Prepare an income statement for the shop based on these estimates. The tax rate is 20%.
b. Calculate the operating cash flow for the repair shop using the three methods given below:
- Dollars in minus dollars out.
- Adjusted accounting profits.
- Add back depreciation tax shield.
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