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)× (1 - Tax rate)] + [Depreciation × Tax rate]

Question

Quizplus · Accepted Answer

The correct formula for calculating the operating cash flow of a project assuming that the interest expense is equal to zero is [(Sales - Costs) x (1 - Tax rate)] + [Depreciation x Tax rate], which is given in option IV. Option I and III are incorrect because they do not take into account the effect of taxes on cash flow, while option II is incorrect because it subtracts taxes instead of adding them.

Which of the Following Are Correct Methods for Computing the Operating