Question

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The 2015 income statement for Egyptian Noise Blasters shows that depreciation expense is $82 million, NOPAT...

The 2015 income statement for Egyptian Noise Blasters shows that depreciation expense is $82 million, NOPAT is $245 million. At the end of the year, the balance of gross fixed assets was $660 million. The change in net operating working capital during the year was $72 million. Egyptian’s free cash flow for the year was $190 million.

Calculate the beginning-of-year balance for gross fixed assets. (Enter your answer in millions of dollars.)

Expert Solution

We have,

Operating cash flows = NOPAT + Depreciation expense = $245 million + $82 million = $327 million

Step 1: Find Investment in operating capital:

Free cash flow = Operating cash flows – Investment in operating capital

$190 million = $327 million – Investment in operating capital

Investment in operating capital = $327 million - $190 million = $137 million

Step 2: Find change in gross fixed assets:

Investment in operating capital = Change in gross fixed assets + Change in net working capital

$137 million = Change in gross fixed assets + $72 million

Change in gross fixed assets = $137 million - $72 million

= $65 million

Step 3: Find Beginning of the year gross fixed assets :

End of the year gross fixed assets – Beginning of the year gross fixed assets = Change in gross fixed assets

End of the year gross fixed assets – Beginning of the year gross fixed assets = $65 million

$660 million - Beginning of the year gross fixed assets = $65 million

Beginning of the year gross fixed assets = $660 million - $65 million = $595 million

jeff jeffy answered 5 months ago

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