Question

a. Fill in the missing numbers in the following income statement: (Do not round intermediate calculations and round your answers to the nearest whole number, e.g. 32.) Sales Costs 679,200 396 800 150 500 Depreciation EBIT Taxes (25%) Nel income b. What is the OCF? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g. 32.) c. What is the depreciation tax shield? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g. 32.) b. OCF c. Depreciation tax shield

Answer 1

Operating Cash Flow =

Sales = 679,200

Less: Costs = ($396,800)

Less: Depreciation = ($150,500)

EBIT = $131,900

Operating Cash Flow = EBIT *(1 - T) + Depreciation

OCF = $131,900 * (1 - 0.25) + $150,500

OCF = $249,425.

Depreciation tax shield = Depreciation * Tax rate

Depreciation tax shield = $150,500 * 0.25 = $37,625