Answer:
EBIT 138,000
taxes 55,200
net income 82,800
OCF 182,600
depreciation tax-shield 39,920
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.
