You have just landed an internship in the CFO's office of Hawkesworth Inc. Your first task is to estimate the Year 1 cash flow for a project with the following data. What is the Year 1 cash flow?


Sales revenues	
$13,000

Depreciation	
$4,000

Other operating costs	
$6,000

Tax rate	
25.0%

Group of answer choices

$6,250

$6,406

$6,566

$6,731

$6,899

To calculate the Year 1 cash flow, we can follow this step-by-step approach using the formula for after-tax cash flow (ATCF):

\[
\text{Cash Flow} = (\text{Sales Revenue} - \text{Operating Costs}) \times (1 - \text{Tax Rate}) + \text{Depreciation}
\]

### Step 1: Calculate Earnings Before Tax (EBT)
\[
\text{EBT} = \text{Sales Revenue} - \text{Operating Costs} - \text{Depreciation}
\]
\[
\text{EBT} = 13,000 - 6,000 - 4,000 = 3,000
\]

### Step 2: Calculate Taxes
\[
\text{Taxes} = \text{EBT} \times \text{Tax Rate}
\]
\[
\text{Taxes} = 3,000 \times 0.25 = 750
\]

### Step 3: Calculate Net Income
\[
\text{Net Income} = \text{EBT} - \text{Taxes}
\]
\[
\text{Net Income} = 3,000 - 750 = 2,250
\]

### Step 4: Add Back Depreciation (Non-cash expense)
Since depreciation is a non-cash expense, it must be added back to the net income to determine the cash flow:
\[
\text{Cash Flow} = \text{Net Income} + \text{Depreciation}
\]
\[
\text{Cash Flow} = 2,250 + 4,000 = 6,250
\]

### Answer:
The Year 1 cash flow is **$6,250**.

Would you like more details on this or have any questions?

### Related Questions:
1. How is depreciation treated in cash flow calculations?
2. What are the different methods of calculating depreciation?
3. How does the tax rate affect cash flow?
4. What role do non-cash expenses play in financial analysis?
5. How would the cash flow change if the tax rate was different?

**Tip:** Always add back non-cash expenses like depreciation when calculating cash flow, as they don't affect actual cash.

You have just landed an internship in the CFO's office of Hawkesworth Inc. Your first task is to estimate the Year 1 cash flow for a project with the following data. What is the Year 1 cash flow?

Sales revenues: $13,000
Depreciation: $4,000
Other operating costs: $6,000
Tax rate: 25.0%

Group of answer choices:
- $6,250
- $6,406
- $6,566
- $6,731
- $6,899

Learn how to calculate Year 1 cash flow for a project using sales revenue of $13,000, depreciation of $4,000, operating costs of $6,000, and a 25% tax rate. Follow the detailed step-by-step approach to estimate after-tax cash flow. Ideal for finance and accounting students.

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