Question

A distributor of computer software instruction manuals plans to expand distribution. Annual sales are currently $240000 and are expected to be $290000 one year from today. Assuming that expenses are 70% of sales each year, what is the cash flow one year from today if the tax rate is 34%? Assume straight line depreciation of $25,000.

Answer 1

Sales		a		$       2,90,000
Cost of sales		b=a*70%		$       2,03,000
Depreciation expense		c		$           25,000
Profit before tax		d=a-b-c		$           62,000
Tax Expense		e=d*34%		$           21,080
Net Income		f=d-e		$           40,920
Depreciation expense		g		$           25,000
Cash flow one year from now		f+g		$           65,920