Full question:
Fill in the missing numbers for the following income statement. (Input all amounts as positive values. Do not round intermediate calculations.)
Sales $ 687,900
Costs $442,800
Depreciation $115,400
EBIT $
Taxes (30%)
Net income $
OCF
What is the depreciation tax shield?
Answer:
Operating Cash Flow(OCF)= $206190
Depreciation tax shield = $34620
Explanation:
To calculate Depreciation tax shield:
Depreciation×tax rate= $115400×0.30=$34620
Operating Cash flow(OCF)= Earnings before interest and taxes(EBIT)+depreciation - income tax expense
So we calculate EBIT and Income tax expense
EBIT= Sales - cost of good sold - depreciation expense
= $ 687,900-$442,800-$115,400= $129,700
Income tax expense= (Sales - cost of goods sold - depreciation expense) × tax rate
=($687900-$442800-$115400)×0.30
=$38910
Therefore, Operating Cash flow(OCF)= $129,700+$$115,400-$38910= $206190
