4. Calculating OCF. Consider the following income statement: Sales Costs Depreciation EBIT Taxes (35%) Net income...

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4. Calculating OCF. Consider the following income statement: Sales Costs Depreciation EBIT Taxes (35%) Net income $558,400 34

4). Find the present value of the following: cash flow stream, discounted at 7 percent: Year 1, $100; Year 2, $400; Years 3 t

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Answer 1

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Answer #1

1. Missing figures are calculated as per below:

EBIT = Sales - Costs - Depreciation

EBIT = $558400 - $346800 - $94500

EBIT = $117100

Taxes = 35% * EBIT

Taxes = 35% * $117100 = $40985

Net income = EBIT - Taxes

Net income = $117100 - $40985 = $76115.

Calculation of operating cash flow:

Operating cash flow = Net income + Depreciation

Operating cash flow = $76115 + $94500 = $170615

Calculation of Depreciation tax shield:

Depreciation tax shield = Tax rate * Depreciation expense

Depreciation tax shield = 35% * $94500 = $33075

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Answer 2

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