Calculate the OCF and CCA tax shield given the following information: Sales $900,000; Costs $575,000; Depreciation $200,000. Tax rate is 34%.

Question

Quizplus · Accepted Answer

OCF (Operating Cash Flow) is calculated as: (Sales - Costs - Depreciation) * (1 - Tax Rate) + Depreciation = ($900,000 - $575,000 - $200,000) * (1 - 0.34) + $200,000 = $282,500. CCA (Capital Cost Allowance) tax shield is calculated as: Depreciation * Tax Rate = $200,000 * 0.34 = $68,000.

Calculate the OCF and CCA Tax Shield Given the Following