Question

Fill in the missing numbers for the following income statement. (Do not round intermediate calculations.)

Sales	$662,600
Costs	424,300
Depreciation	100,700
EBIT
Taxes (24%)
Net income

b.	Calculate the OCF. (Do not round intermediate calculations.)
c.	What is the depreciation tax shield? (Do not round intermediate calculations.)

b.	OCF
c.	Depreciation tax shield

Answer 1

Sales	$662,600
Costs	424,300
Depreciation	100,700
EBIT	137,600
Taxes (24%)	33,024
Net income	104,576

(b)-Operating Cash Flow (OCF)

Operating Cash Flow (OCF) = [(Sales – Costs) x (1 – Tax Rate)] + [Depreciation x Tax Rate]

= [($662,600 - $424,300) x (1 – 0.24)] – [$100,700 x 0.24]

= [$238,300 x 0.76] + [$100,700 x 0.24]

= $181,108 + $24,168

= $205,276

“Operating Cash Flow (OCF) = $205,276”

(c)- Depreciation tax shield

Depreciation tax shield = Depreciation Expense x Tax Rate

= $100,700 x 0.24

= $24,168

“Depreciation tax shield = $24,168”