Calculating Projected Net Income.

Calculating Projected Net Income.
Calculating Projected Net Income.

A proposed new investment has projected sales of $645,000. Variable costs are 40 percent of sales, and fixed costs are $168,000; depreciation is $83,000. Prepare a pro forma income statement assuming a tax rate of 35 percent. What is the projected net income? What is the OCF?

Hint use the formula OCF= EBIT + Depr. – Taxes. Utilizing the depreciation tax shield approach for OCF –Hint the OCF=((Sales – Costs) (1-T) + (Depr. *T)), determine the operating cash flow (OCF). The OCF number should be the same whether you used the pro forma income statement approach or the depreciation tax shield approach. What is the depreciation tax shield within the OCF?

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