A project will reduce costs by $62,750 but increase depreciation by $14,812.What is the operating cash flow of this project based on the tax shield approach if the tax rate is 34 percent?

Question

Quizplus · Accepted Answer

The operating cash flow using the tax shield approach is calculated as: OCF = (Cost Savings - Depreciation) * (1 - Tax Rate) + Depreciation. Substituting the given values: OCF = ($62,750 - $14,812) * (1 - 0.34) + $14,812 = $46,451.08.

A Project Will Reduce Costs by $62,750 but Increase Depreciation