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You have calculated the pro forma net income for a new project to be $45,870. The incremental taxes are $22,120 and incremental depreciation is $16,180. What is the operating cash flow?

Question

You have calculated the pro forma net income for a new project to be 45,870.Theincrementaltaxesare45,870. The incremental taxes are 22,120 and incremental depreciation is $16,180. What is the operating cash flow?

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Solution

To calculate the operating cash flow, you need to add back the incremental taxes and the incremental depreciation to the pro forma net income. Here's how you do it:

Step 1: Start with the pro forma net income, which is $45,870.

Step 2: Add the incremental taxes, which are 22,120.Theresultis22,120. The result is 45,870 + 22,120=22,120 = 67,990.

Step 3: Add the incremental depreciation, which is 16,180.Theresultis16,180. The result is 67,990 + 16,180=16,180 = 84,170.

So, the operating cash flow for the new project is $84,170.

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