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The operating cash flow for a project should exclude which one of the following? a. Taxes b....

Question:

The operating cash flow for a project should exclude which one of the following?

a. Taxes

b. Variable costs

c. Fixed costs

d. Interest expense

e. Depreciation tax shield

Operating Cash Flow:

Operating cash flow is the flow of cash generated from regular operating activities. The difference between operating cash flow and operating income reflects the value of non-cash operating revenue and non-cash operating costs.

Answer and Explanation:

The answer is d).

In general, any cash flow relate to investing or borrowing activities should be excluded from operating cash flow. The reason is cash flows related to these activities are not related to regular operation, but are instead part of the financing aspect of the firm. For this reason, interest expense is not included in the operating cash flow.


Learn more about this topic:

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Operating Cash Flow: Definition & Examples

from Finance 101: Principles of Finance

Chapter 10 / Lesson 4
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