Final answer:
The operating cash flow for Die Hard Corp. is calculated by adding net income, depreciation, and after-tax interest expense, which amounts to $30.8M.
Step-by-step explanation:
To calculate operating cash flow, we start with the firm's net income and add back non-cash expenses and adjust for changes in working capital. In this case, Die Hard Corp's net income is $21M. We then add back the depreciation expense, which is a non-cash charge, of $5M.
We also need to add back the interest expense; however, the interest expense must be adjusted for taxes since interest is tax-deductible.
The tax shield on the interest expense is the interest multiplied by the tax rate, thus $6M × 20% = $1.2M. We subtract this from the interest expense and add the result to the net income.
Operating Cash Flow = Net Income + Depreciation + (Interest Expense - Tax Shield on Interest)
= $21M + $5M + ($6M - $1.2M)
= $21M + $5M + $4.8M
= $30.8M