Question

In: Finance

Brian runs a small corner store. Last year he had sales of $260,000. The cost of...

Brian runs a small corner store. Last year he had sales of $260,000. The cost of goods sold was $130,000 and depreciation was $40,000. He did not pay any interest. His taxation rate was 32.5%. His fixed (non-current) assets were valued at $250,000 at the beginning of the year. During the year he invested in some refrigeration equipment and now his fixed assets are valued at $270,000. His net working capital fell by $30,000 because Brian adopted a stricter inventory management process. How much free cash flow (FCF) has Brian's corner store generated for him this year?

Select one: a. $40,750 b. $100,500 c. $70,750 d. $32,077 e. $90,800

Solutions

Expert Solution

Solution: Value of Fixed Assets at the beginning of the year =  $250,000

Value of Fixed Assets at the end of the year = $270,000

Depreciation for the year = $40,000

Value of Fixed Assets at the end of the year = Value of Fixed Assets at the beginning of the year + Capital Expenditure during the year - Depreciation for the year

Capital Expenditure during the year (Capex) - Depreciation for the year = Value of Fixed Assets at the end of the year - Value of Fixed Assets at the beginning of the year

Hence, Capex - Depreciation = $270000 - $250000 = $20000

Capex - $40000 = $20000

Thus, Capex = $60000

Change in Working Capital Investment = -$30,000

Sales 260000
Costs of Goods Sold 130000
Gross Profit 130000
Depreciation 40000
Interest 0
Profit for Taxation 90000
Tax rate = 32.5%
Tax Expense 29250
Net Income $60750


Free Cash Flow (FCF) = Net Income + Depreciation + Interest*(1-tax%) - Capex - Working Capital Investment

= 60750 + 40000 + 0 - 60000 -(-30000)

= 60750 + 40000 - 60000 + 30000 = $70750

Option C is correct

jeff jeffy answered 3 months ago
Next > < Previous

Related Solutions

The daily sales of a small retail store in Calgary for the last year are normally...
The daily sales of a small retail store in Calgary for the last year are normally distributed with a mean of $2050, and a standard deviation of $300. What is the probability of daily sales exceeding $2,500? From a sample of 5 days, what is the probability of having a sample mean less than $2,200? a. 0.0668; 0.8682 b. 0.4332; 0.0668 c. 0.0668; 0.9332 d. 0.0668; 0.9795 e. 0.4332; Approximately 100%
1. The Polyana Shoe Store had sales last year of $40 million based upon a cost...
1. The Polyana Shoe Store had sales last year of $40 million based upon a cost of goods sold of $30 million. Purchases represent 75% of COGS. Polyana also has inventory, accounts receivable and accounts payable of $5,000,000, $7,000,000, and $3,500,000, respectively. (Round-up the days to next whole number) a) What is Polyana’s cash conversion cycle period? b) Based on current sales and cash conversion cycle, what is Polyana’s working capital requirement? c) If sales remain at $40 million and...
Frederick opened a small organic grocery store last year and is considering the profits he made....
Frederick opened a small organic grocery store last year and is considering the profits he made. His store took in $120,000 in total revenue. To rent his storefront for the year, he had to invest $40,000. To supply it with the shelves, refrigerators, registers, and other miscellaneous equipment necessary, he had to invest another $10,000. Over the course of the year, he paid his employees a total of $35,000. To run his new business, he had to give up his...
Frederick opened a small organic grocery store last year and is considering the profits he made....
Frederick opened a small organic grocery store last year and is considering the profits he made. His store took in $120,000 in total revenue. To rent his storefront for the year, he had to invest $40,000. To supply it with the shelves, refrigerators, registers, and other miscellaneous equipment necessary, he had to invest another $10,000. Over the course of the year, he paid his employees a total of $35,000. To run his new business, he had to give up his...
Ichabod runs a clothing store in London. He recently purchased 1000 dress shirts that had a...
Ichabod runs a clothing store in London. He recently purchased 1000 dress shirts that had a manufacturer’s list price of $35. On each shirt there was a trade discount of 10%, 8% and 6% from the manufacturer. Ichabod’s store has operating expenses that are 35% of the selling price and rate of markup is 60% on selling price.   a) He sold 400 shirts at the regular selling price. What was the total revenue from the first 400 shirts sold? b)...
11. Brian was bitten during the last attack on the compound. He was rushed to the...
11. Brian was bitten during the last attack on the compound. He was rushed to the field hospital where his vitals were measured immediately and every 30 minutes thereafter. Create a scatter graph (with line) in MS Excel of the following data. Determine which of the variables is independent (for the X axis) and which is dependent (Y axis). Copy & paste the excel graph below. (10 pts) Patient heart rate (BPM) after infection. Time (minutes) Heart Rate (beats per...
Last​ year, Stevens Inc. had sales of ​$405 comma 000​, with a cost of goods sold...
Last​ year, Stevens Inc. had sales of ​$405 comma 000​, with a cost of goods sold of ​$110 comma 000. The​ firm's operating expenses were $ 133 comma 000​, and its increase in retained earnings was ​$53 comma 000. There are currently 22 comma 100 common stock shares outstanding and the firm pays a ​$1.57 dividend per share. a. Assuming the​ firm's earnings are taxed at 34 ​percent, construct the​ firm's income statement. b. Compute the​ firm's operating profit margin....
Last year, Dollar General had $7,000 in sales, and cost of goods sold was $4,000. Depreciation...
Last year, Dollar General had $7,000 in sales, and cost of goods sold was $4,000. Depreciation expenses totaled $1000 and interest expense was $1400. If the tax rate is 25%, what is the net profit margin for Dollar General? What is its NOPAT margin?
(Evaluating profitability​) Last​ year, Stevens Inc. had sales of ​$398,000​, with a cost of goods sold...
(Evaluating profitability​) Last​ year, Stevens Inc. had sales of ​$398,000​, with a cost of goods sold of ​$110,000. The​ firm's operating expenses were $134,000​, and its increase in retained earnings was ​$57,000. There are currently 21,800 common stock shares outstanding and the firm pays a ​$1.61 dividend per share. a. Assuming the​ firm's earnings are taxed at 34 ​percent, construct the​ firm's income statement. b. Compute the​ firm's operating profit margin. c. What was the times interest​ earned? a. Assuming...
Last​ year, Stevens Inc. had sales of​$404 comma 000 with a cost of goods sold of...
Last​ year, Stevens Inc. had sales of​$404 comma 000 with a cost of goods sold of $120 comma 000. The​ firm's operating expenses were $129 comma 000 and its increase in retained earnings was ​$60 comma 000. There are currently 23 comma 000 common stock shares outstanding and the firm pays a $1.59 dividend per share. a. Assuming the​ firm's earnings are taxed at 34 ​percent, construct the​ firm's income statement. b. Compute the​ firm's operating profit margin. c. What...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT