Answers
Solution Firstly, let us make some basic calculation Particulars Sales Less: Cost Less: Depreciation EBIT Less: Tax @ 24% (EBIT X Tax rate) PAT Amount 177000 89000 24600 63400 15216 48184 Now, Let's calculate Cashflow using 4 approach Approach 1: Basic Cash Flow = = EBIT - Taxes + Depreciation 63400 - 15216 + 24600 72784 Approach 2: Top down approach Cash Flow = = Sales - Cost - Taxes 177000 - 89000 - 15216 72784 Approach 3: TaxShield Cash Flow = = (Sales - Cost) X (1-tax rate) + Depreciation X Tax rate (177000-89000) X (1-0.24) + 24600 X 0.24 72784 Approach 4: Bottom Up approach Cash Flow = PAT + Depreciation 48184 + 24600 72784 Hence, operating cash flow is same under all 4 approach Particulars EBIT - Taxes + Depreciation Top Down Tax Shield Botton Up Amount 72784 72784 72784 72784
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