Lauryn’s Doll Co. had EBIT last year of $44 million, which is net of a depreciation...

Lauryn’s Doll Co. had EBIT last year of $44 million, which is net of a depreciation expense of $4.4 million. In addition, Lauryn’s made $5.25 million in capital expenditures and increased net working capital by $3.3 million. Assume that Lauryn’s has a reported equity beta of 1.4, a debt-to-equity ratio of .7, and a tax rate of 21 percent. What is Lauryn’s FCF for the year?(Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

FCF

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Answer:

Lauryn’s Doll Co's EBIT = $44 million

Depreciation expense = $4.4 million

Capital Expenditure = $5.25 million

Increase in Net working capital = $3.3 million

Tax Rate = 21%

Free cash Flow = Operating Cash Flow − Capital Expenditures

Operating Cash Flow = Operating Income + Depreciation – Taxes + Change in Working Capital

Operating Income = EBIT = $44 million

Taxes = 21% of EBIT = $44 million * 21% = $9.24 million

Operating cash flow = $44 million + $4.4 million - $9.24 Million + $3.3 million = $42.46 million

Free cash Flow = Operating Cash Flow − Capital Expenditures = $42.46 million - $5.25 million

So, FCF = $37.21 million

jeff jeffy answered 1 year ago

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