Which of the following are correct methods for computing the operating cash flow of a project assuming that the interest expense is equal to zero?
I.EBIT + Depreciation - Taxes
II.EBIT + Depreciation + Taxes
III.Net Income + Depreciation
IV.(Sales - Costs)x (Taxes + Depreciation)x (1 - Taxes)

Question

Quizplus · Accepted Answer

The correct formula for computing operating cash flow is EBIT + Depreciation - Taxes. Option I satisfies this formula, while option III is a variation of it that adds net income with depreciation. Option II includes taxes, which should be subtracted rather than added in this formula. Option IV is not a correct formula for computing operating cash flow.

Which of the Following Are Correct Methods for Computing the Operating