Answer:
The correct answer is = $64,409,960
However, if we assume there are no Differed Tax, the answer will be
$47,371, 400
Explanation:
OCF stands for Operating Cash Flow.
The basic formula for Operation Cash Flow is =
Net Income + Non-Cash Expenses - Increase in working capital
Net Income:
Old Boards = 1,520 x 24,900 = $37,848,000
New Boards = 1500 x 26,400 = $39,600,000
Total Income = $77,448,000
Non-Cash Expenses:
Depreciation = 1.875 million + 2.9 million = $4,775,000
(Assumption) Differed income tax = 22% of Sales = $17,038,560
Total Non-Cash Expense = $21,813,560
Increase in working Capital:
45% of Sales
i.e. $34,851,600
Hence:
77,448,000 + 21,81 3,560- 34,851,600
= $64,409,960
