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Calculating Cash FLows?

In a particular year, a firm has revenues of $6,500, cash expenses of $4,000, and depreciation charges of $1,500. If the tax rate is 30%, what is the firm's cash flow from operations for that year?

I ended up getting $2,500 because I did not include the Depreciation charges. But this is confusing me because

6500-4000=2500

Then I would usually do 2500- (.30*1500) = $2050

but it is not one of my options

1 Answer

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  • 8 years ago
    Favorite Answer

    After tax ...(6500 - 4000 - 1500) * 0.70 = 700

    then add back depreciation...700 + 1500 = $2,200

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