silver island health is evaluating project x. in year 4, project x is expected to have relevant revenue of…

silver island health is evaluating project x. in year 4, project x is expected to have relevant revenue of $458,000, relevant variable costs of $257,000, and relevant depreciation of $98,000. in addition, silver island health would have one source of fixed costs associated with project x. yesterday, silver island health signed a deal with tabletop marketing to develop an advertising campaign for project x. the terms of the deal require silver island health to pay tabletop marketing either $67,000 in 4 years if project x is pursued or $51,000 in 4 years if project x is not pursued. the tax rate is 30 percent. what is the operating cash flow for year 4 that silver island health should use in its npv analysis of project x? input instructions: round your answer to the nearest dollar. dollars

silver island health is evaluating project x. in year 4, project x is expected to have relevant revenue of $458,000, relevant variable costs of $257,000, and relevant depreciation of $98,000. in addition, silver island health would have one source of fixed costs associated with project x. yesterday, silver island health signed a deal with tabletop marketing to develop an advertising campaign for project x. the terms of the deal require silver island health to pay tabletop marketing either $67,000 in 4 years if project x is pursued or $51,000 in 4 years if project x is not pursued. the tax rate is 30 percent. what is the operating cash flow for year 4 that silver island health should use in its npv analysis of project x? input instructions: round your answer to the nearest dollar. dollars

Answer

Answer:

$177,800$

Explanation:

Step1: Calculate EBIT

EBIT = Revenue - Variable Costs - Depreciation - Fixed Costs EBIT = $458000 - 257000 - 98000 - (67000 - 51000)$ EBIT = $458000 - 257000 - 98000 - 16000$ EBIT = $87000$

Step2: Calculate Taxes

Taxes = EBIT × Tax - rate Taxes = $87000\times0.3$ Taxes = $26100$

Step3: Calculate Operating Cash - Flow

Operating Cash - Flow = EBIT - Taxes+Depreciation Operating Cash - Flow = $87000 - 26100+98000$ Operating Cash - Flow = $177800$