Fill in the missing numbers for the following income statement. (Do not round intermediate calculations.) Sales $668,600 Cost 431,300 Depreciation 103,700 EBIT Taxes (24%) Net Income a. Calculate the OCF. (Do not round intermediate calculations.) b. What is the depreciation tax shield?

1 answer
Question:

Fill in the missing numbers for the following income statement. (Do not round intermediate calculations.)
Sales $668,600
Cost 431,300
Depreciation 103,700
EBIT
Taxes (24%)
Net Income
a. Calculate the OCF. (Do not round intermediate calculations.)
b. What is the depreciation tax shield?

Answers

Answer: a. $205,236 b. $24,888 Explanation: a. The computation of OCF is shown below:- EBIT = Sales - Cost - Depreciation = $668,600 - $431,300 - $103,700 = $133,600 Net income = EBIT - Taxes = $133,600 - ($133,600 × 24%) = $133,600 - $32,064 = $101,536 Operating cash flow = EBIT - Taxes + Depreciation = $133,600 - $32,064 + $103,700 = $205,236 b. The computation of depreciation tax shield is shown below:- Depreciation tax shield = Depreciation × Tax = $103,700 × 24% = $24,888

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