Question

Consider the following income statement Sales $ 912,000 Costs 593,600 Depreciation 135,000 Taxes 24 % (a...

Consider the following income statement Sales $ 912,000 Costs 593,600 Depreciation 135,000 Taxes 24 %

(a ) Calculate the EBIT

(b ) Calculate the net income.

(c ) Calculate the OCF.

(d ) Calculate the depreciation tax shield.

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Answer #1

(a) Calculation of EBIT:

Particulars Amount
Sales 912,000
(-) Costs (593,600)
(-) Depreciation (135,000)
EBIT 183,400

(b) Calculation of Net Income:

Particulars Amount
EBIT 183,400
(-)Taxes @24% (183,400*24%) (440,16)
Net Income 139,384

(c) Calculation of OCF:

OCF = Net Income+Non cash expenses(depreciation)+/-Changes in assets and Liabilities

=139,384+135,000+0

=274,384

(d) Calculation of depreciation tax shield:

Depreciation tax shield = depreciation*tax rate

=135,000*24%

=32,400

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