P4-4 Depreciation and accounting cash flow A firm has gathered the following data for its current year's operations. The firm has only one asset, which has a 3-year recovery period. The cost of the...

Extracted text: P4-4 Depreciation and accounting cash flow A firm has gathered the following data for its current year's operations. The firm has only one asset, which has a 3-year recovery period. The cost of the asset a year ago was $165,000. The depreciation rate is 45%. Accruals $ 12,500 Current assets 135,000 Interest expense 13,550 Sales revenue 420,000 Inventory Total costs before depreciation, interest, and taxes Tax rate on ordinary income 82,300 295,000 40% a. Calculate the firm's operating cash flow for the current year (see Equations 4.2). b. Why is it important to add back noncash items such as depreciation when calcu- lating cash flows?