Asked by
abhaya nakade
on Dec 09, 2024
Verified
Calculate the OCF and CCA tax shield given the following information: Sales $490,000; Costs $250,000; Depreciation $85,000. Tax rate is 30%.
A) OCF = $195,500; CCA tax shield = $28,000
B) OCF = $193,500; CCA tax shield = $28,900
C) OCF = $191,500; CCA tax shield = $29,800
D) OCF = $190,500; CCA tax shield = $30,700
E) OCF = $189,500; CCA tax shield = $31,600
CCA Tax Shield
Refers to the reduction in taxable income for businesses through the deduction of depreciation on long-term assets.
Operating Cash Flow (OCF)
Cash generated from a company's regular business operations, indicating its ability to generate sufficient revenue to maintain operations.
- Grasp the essence and critical nature of cash flows in the evaluation of financial analyses and capital budgeting choices.
- Grasp the role of depreciation and tax shields in impacting the cash flows related to operations and the overall assessment of project values.
Verified Answer
KO
Learning Objectives
- Grasp the essence and critical nature of cash flows in the evaluation of financial analyses and capital budgeting choices.
- Grasp the role of depreciation and tax shields in impacting the cash flows related to operations and the overall assessment of project values.