Homework Answers
Sales = $175,000
Less: Cost = $93,000
Gross Profit = $82,000
Less: Depreciation = $24,800
EBT = $57,200
Less: Tax Rate@23% = $13,156
EAT= $44,044
a). OCF = EBIT + Depreciation - Taxes = $57,200 + $24,800 - $13,156 = $68,844
b). OCF = [(sales - costs - Depreciation) * (1 - T)] + Depreciation
= [($175,000 - $93,000 - $24,800) * (1 - 0.23)] + $24,800
= $44,044 + $24,800 = $68,844
c). OCF = [(sales - costs) * (1 - T)] + [Depreciation * T]
= [($175,000 - $93,000) * (1 - 0.23)] + [$24,800 * 0.23]
= $63,140 + $5,704 = $68,844
d). OCF = Net income + depreciation = $44,044 + $24,800 = $68,844
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