Which one of the following formulas is incorrect?
A) Operating cash flow = revenues − cash expenses − taxes
B) Operating cash flow = net profit + depreciation
C) Depreciation tax shield = depreciation × (1 − tax rate)
D) Operating cash flow = (revenues − cash expenses) × (1 − tax rate) + (depreciation × tax rate)

Question

Quizplus · Accepted Answer

The correct formula for the depreciation tax shield is depreciation × tax rate, not depreciation × (1 − tax rate).

Which One of the Following Formulas Is Incorrect