Question

Fill in the missing numbers in the following income statement: (Do not round intermediate calculations.)Requirement 1: Sales $ 660,800 Costs 422,200 Depreciation 99,800 Requirement 1: find EBIT, Taxes (40%) and Net income. Requirement 2: What is the OCF? Requirement 3: What is the depreciation tax shield?

Answer 1

EBIT 138,000

taxes 55,200

net income 82,800

OCF 182,600

depreciation tax-shield 39,920

Step-by-step explanation:

Sales 660,000

Cost (422,200)

Depreciation (99,800)

Earnings

before interest 138,000

and taxes

Taxes 138,000 x 40% = (55,200)

Net Income 82,800

Operating Cash flow

net income + deprection = 82,800 + 99,800 = 182.600‬

depreciation tax-shield 99,800 x 40% = 39,920

as the depreication is an accounting method to extend the impact of an already incurred cost (acquisition of amchinery and other long-term asset ) It do not involve cahs outflow thus, makes increase the operating cashflow and makes the tax expense to decrease as well.