The Oakland Mills Company has disclosed the following financial information in its annual reports for the period ending March 31, 2011: sales of $1,544,077, costs of goods sold of $639,978, depreciation expenses of $175,000, and interest expenses of $89,575. Assume that the firm has a tax rate of 35 percent. Compute the cash flows to investors from operating activity.
To compute the cash flows to investors from operating activity, we need to calculate the net operating income (NOI) first. The formula for NOI is:
NOI = Sales - Costs of Goods Sold - Depreciation Expenses - Interest Expenses
Given the information provided:
Sales = $1,544,077
Costs of Goods Sold = $639,978
Depreciation Expenses = $175,000
Interest Expenses = $89,575
Plugging in the values:
NOI = $1,544,077 - $639,978 - $175,000 - $89,575
NOI = $639,524
Next, we need to calculate the tax expense. The formula for tax expense is:
Tax Expense = Tax Rate * (Sales - Costs of Goods Sold - Depreciation Expenses)
Given the information provided:
Tax Rate = 35% (or 0.35)
Plugging in the values:
Tax Expense = 0.35 * ($1,544,077 - $639,978 - $175,000)
Tax Expense = $183,956.05
Now, we can calculate the net income after taxes. The formula for net income after taxes is:
Net Income After Taxes = NOI - Tax Expense
Plugging in the values:
Net Income After Taxes = $639,524 - $183,956.05
Net Income After Taxes = $455,567.95
Finally, to calculate the cash flows to investors from operating activity:
Cash Flow to Investors from Operating Activity = Net Income After Taxes + Depreciation Expenses
Plugging in the values:
Cash Flow to Investors from Operating Activity = $455,567.95 + $175,000
Cash Flow to Investors from Operating Activity = $630,567.95
Therefore, the cash flows to investors from operating activity for the Oakland Mills Company is $630,567.95.
To compute the cash flows to investors from operating activity, we need to consider the following components:
1. Net Income
2. Depreciation Expenses
3. Changes in Working Capital
Step 1: Calculate Net Income
Net Income = Sales - Cost of Goods Sold - Depreciation Expenses - Interest Expenses - Taxes
Net Income = $1,544,077 - $639,978 - $175,000 - $89,575 - ($1,544,077 - $639,978 - $175,000 - $89,575) * 0.35
Net Income = $1,544,077 - $639,978 - $175,000 - $89,575 - ($639,978 + $175,000 + $89,575 - $1,544,077) * 0.35
Net Income = $1,544,077 - $639,978 - $175,000 - $89,575 - (-$639,978 + $175,000 + $89,575 - $1,544,077) * 0.35
Net Income = $1,544,077 - $639,978 - $175,000 - $89,575 - (-$639,978 + $175,000 + $89,575 - $1,544,077) * 0.35
Net Income = $1,544,077 - $639,978 - $175,000 - $89,575 - (-$639,978 + $175,000 + $89,575 - $1,544,077) * 0.35
Net Income = $1,544,077 - $639,978 - $175,000 - $89,575 - (-$639,978 + $175,000 + $89,575 - $1,544,077) * 0.35
Net Income = $1,544,077 - $639,978 - $175,000 - $89,575 - (-$625,500) * 0.35
Net Income = $1,544,077 - $639,978 - $175,000 - $89,575 - $218,925
Net Income = $1,544,077 - $639,978 - $175,000 - $89,575 - $218,925
Net Income = $954,500
Step 2: Calculate Depreciation Expense
Depreciation Expense = $175,000
Step 3: Calculate Changes in Working Capital
We need more information about the changes in working capital to calculate this.
Step 4: Calculate Cash Flows to Investors from Operating Activity
Cash Flows to Investors from Operating Activity = Net Income + Depreciation Expenses + Changes in Working Capital
Cash Flows to Investors from Operating Activity = $954,500 + $175,000 + Changes in Working Capital
Please provide additional information regarding the changes in working capital for a more accurate calculation.