Mushtahir wrote:
In today's FIN254 Final exam, in problem 1, you mentioned 'pretax operating cash flow $400000'. While solving the problem i assumed that the term 'pretax' is just a trick to create confusion. Because we get OCF after deducting dep. expense and tax from EBIT. But once we get OCF we don't tax it like we do for salvage.
OCF is alway 'pretax'.Therefore i kept 400000 as it was. Still i am pretty confused. Was my logic correct?
Dear Mushtahir:
Please recall the formula for determining OCF from Income Statement, it's OCF = EBIT + Depreciation - Taxes. Therefore, pretax OCF is just EBIT + Depreciation. Thus, if you deduct depreciation from pretax OCF you will get EBIT. After deducting taxes from EBIT, you will get the Net Income. Since there is no interest expense in the problem, OCF is just Net Income + Depreciation.
Hope this has clarified your confusion.
Thanks.
3 comments:
Sir,will we have to do amortization of intangible assets or only depreciation?
Sir, when we can get the final grades of Fin254 ? have u already posted the marks of all exams and assignments?
Sir, when we can get the final grades of Fin254?
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