Answer:
Explanation:
In order to calculate the OCF, we first need to calculate net income.
We have:
Sales: $159,800
- Cost: -$80,840
- Depreciation $5,640
EBT : $73,320
- Tax = $73,320*24% = $17,596.8
Net income : $55,723.2
Using the most common financial calculation for OCF, we get:
OCF = EBIT + Depreciation - Taxes
OCF = $73,320 + $5,640 - $17,596.8
OCF = $61,363.2
The top-down approach to calculating OCF yields:
OCF = Sales - Costs - Taxes
OCF = $159,800 - $80,840 - $17,596.8
OCF = $61,363.2
The tax-shield approach is:
OCF = (Sales - Costs)(1 - tC) + tCDepreciation
OCF = ($159,800 - $80,840)(1 - 0.24) + 0.24*$5,640
OCF =$61,363.2
And the bottom-up approach is:
OCF = Net income + Depreciation
OCF = $55,723.2 +$5,640
OCF = $61,363.2
Hope it will find you well
