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The owner of a bicycle repair shop forecasts revenues of $240,000 a year. Variable costs will be $70,000, and rental costs for the shop are $50,000 a year. Depreciation on the repair tools will be $30,000. The tax rate is 30%.
a. Calculate operating cash flow for the year by using all three methods: (a) adjusted accounting profits; (b) cash inflow/cash outflow analysis; and (c) the depreciation tax shield approach.
Method Operating Cash Flow
Adjusted accounting profits $ ______________
Cash inflow/cash outflow analysis $______________
Depreciation tax shield approach $_______________
b. Are the above answers equal?
Yes or No
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