Question

Consider the following income statement:

Sales $ 985,392

Costs 641,088

Depreciation 145,800

Taxes 22 %

Calculate the EBIT.

Calculate the net income.

Calculate the OCF.

What is the depreciation tax shield?

Answer 1

Solution follows The values provided in the question are as Sales $ 985,392.00 costs $ 641,088 .00 Depreciation = $ 145,000.00 Taxes 22 %. OR 0.22 Demand Question (EBIT) Earning Before interest and Taxes = ? (NI) Net Income Operating Cash flow (OCF) = ? Depreciation Tax Shield = ? (A) P (B) (1) We can calculate the EBIT, Net Income and operating cash flow with the help of table. Which are as follows. Particulars Amount ($) (A) Sales $ 985,392.00 (Given) (B) $ 641,008.00 (Silver) Leni Costs $ 145,800.00 Given) (C) Lens: Depreciation (D) kaming before interest and taxes. interest and taxes. $ 198,504.00 (EBIT) (A-B-C)

Nil (E) Less! Interest (F) Earning Before Daten (EBT) $190,504.00 laiven) (6) Lessi Taxes @ 22% $ 43,670.88 (0.22 * $198,504) (H) Net Income (NL) $154,033.12 (F-6) (I) Add: Depreciation $ 145,000.00 Given) (I) Operating Cash How (OCF) $ 300,633.12 (H+1) (Given) calculation * Depreciation Tax Shield Depreciation Taxshields Depreciation * Tax Rale Using the values laiven) Depreciation Tax Shield $145,000.00 x 0.22 $32076.00 Depreciation Tax Shield → Aspen Demand Question, we can see from Table le Win-1 (4) EBIT = $ 190,504.00

(B) Net Income (NI) = $154,033.12 ©) operating cash flow (OCF) = $ 300,633. 12 >(D) Depreciation Tax Shield - $32,076.00 (W.N-2)