The tax-shield approach is used for calculating OCF, if the only information from the statement of comprehensive income items known to you are net income and depreciation.

Question

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The tax-shield approach is not used for calculating Operating Cash Flow (OCF); instead, it is used to calculate the value of tax savings due to interest expenses or depreciation. For calculating OCF with limited information, adjustments to net income (such as adding back depreciation) are typically made, but this does not specifically involve the tax-shield formula.

The Tax-Shield Approach Is Used for Calculating OCF, If the Only