Using the Tax Shield Approach, Calculate OCF Given the Following

question 166

Multiple Choice

Using the tax shield approach, calculate OCF given the following information: Sales $885,000; Costs $670,000; Depreciation $120,000. Tax rate is 35%.

• A) 165,500
• B) $171,750
• C) $175,500
• D) $181,750
• E) $185,500

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Definitions:

Manufacturing Overhead

All indirect costs associated with manufacturing, including but not limited to utilities, rent, and salaries of support staff.

Accounts Payable

Accounts Payable represents a company's obligations to pay off a short-term debt to its creditors or suppliers within a given time frame.

Private Placement

A means of raising capital through the sale of securities to a small number of select investors rather than through a public offering.

Initial Public Offering

The process by which a private company becomes publicly traded by offering its shares to the public for the first time.