Tully's Tool and Die Has the Following Projections for Year

question 13

Multiple Choice

Tully's Tool and Die has the following projections for Year 1 of a capital budgeting project. Year 1 Incremental Projections:
Sales $400,000
Variable Costs $240,000
Fixed Costs $80,000
Depreciation Expense $40,000
Tax Rate 35%
Calculate the operating cash flow for Year 1.

• A) $26,000
• B) $66,000
• C) $40,000
• D) $38,200

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Definitions:

Indirect Method

A cash flow statement reporting approach that starts with net income then adjusts for non-cash transactions and changes in working capital to calculate cash flow from operating activities.

Operating Activities

Business actions directly related to the production and delivery of goods and services.

Investing Activities

Transactions involving the purchase or sale of long-term assets and investments, as reported in a company's statement of cash flows.

Noncash Investing

Transactions that involve the acquisition or disposal of non-cash assets, such as property, plant, and equipment, through means other than cash payments.