The Moore Corporation's Net Cash Flow Calculation

The Moore Corporation's Net Cash Flow Calculation

The Moore Corporation had operating income (EBIT) of $700,000. The company's depreciation expense is $140,000. Moore is 100% equity financed, and it faces a 40% tax rate. Assuming no changes to any of the Balance Sheet accounts, what is its net cash flow?

What is The Moore Corporation's net cash flow? The net cash flow is $560,000

Explanation:

The computation of the net cash flow is shown below:

= Operating income + depreciation - tax expense

= $700,000 + $140,000 - $280,000

= $560,000

The tax expense is calculated by

= Operating income × tax rate

= $700,000 × 40%

= $280,000

For computing the net cash flow, we have to add the depreciation expense and deduct the income tax expense.

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