You are given the following data for year 1: Revenues = 100; Fixed costs = 30; Total variable costs = 50; Depreciation = $10; Tax rate = 21 percent. Calculate the after-tax cash flow for the project for year 1.
A)$17.90
B)$13.10
C)$10.00
D)$7.30

Question

Quizplus · Accepted Answer

The after-tax cash flow can be calculated by first determining the operating income, then subtracting taxes, and finally adding back depreciation (since it's a non-cash expense). Operating income = Revenues - Fixed costs - Total variable costs = 100 - 30 - 50 = $20. Taxes = Operating income * Tax rate = 20 * 0.21 = $4.2. After-tax operating income = Operating income - Taxes = 20 - 4.2 = $15.8. After-tax cash flow = After-tax operating income + Depreciation = 15.8 + 10 = $25.8. However, none of the options match this calculation, suggesting a misunderstanding in the question's setup or a mistake in the calculation. Given the options, the correct approach to match an option would involve recognizing a mistake in the calculation or interpretation of the provided options. Since none of the calculations directly match the options and without further context or clarification, a direct match to the provided answer choices is not possible based on the standard approach to calculating after-tax cash flow. This indicates a need to reassess the calculation or the interpretation of the question's data and intended answer.

You Are Given the Following Data for Year 1: Revenues