Consider a firm that reports the reports the following: sales $274,691, cost of goods sold $105,479 and...

Consider a firm that reports the reports the following: sales $274,691, cost of goods sold $105,479 and interest expense of $74,140. The firm has depreciation expense $57,257 and a 15% tax rate. During the last year the firm had an increase in gross fixed assets of $123,964 and a decrease in net operating working capital of $21,169. Calculate the firm's free cash flow. Your answer should be in dollars. So $30 million should be $30,000,000

Expert Solution

A	B	C	D	E	F	G	H	I	J
2
3		Free cash flow can be calculated as follows:
4		Free Cash Flow = Operating Cash Flow - Capital Expenditures - Change in working capital
5		Operating Cash Flow = EBIT - Tax Expense +Depreciation
6
7		Tax Rate	15%
8
9
10		Sales	$274,691
11		Cost of Goods Sold	$105,479
12		Gross Profit	$169,212
13		Depreciation Expense	$57,257
14		EBIT	$111,955	=D12-D13
15		Interest Expense	$74,140
16		Taxable income	$37,815	=D14-D15
17		Tax Expense	$5,672.25	=D16*D7
18		Net Income	$32,142.75	=D16-D17
19
20		Operating Cash Flow	=EBIT - Tax Expense + Depreciation
21			=$111,955 -$5,672.25 + $57,257
22			$163,539.75	=D14-D17+D13
23
24		Capital Expenditure	=Increase in Gross fixed assets
25			$123,964
26
27		Change in working capital	=-Decrease in working capital
28			($21,169)
29
30		Free Cash Flow	= Operating Cash Flow - Capital Expenditures - Change in working capital
31			=$163,539 - $123,964 - (-$21,169)
32			$60,744.75	=D22-D25-D28
33
34		Hence Free Cash Flow	$60,744.75
35

jeff jeffy answered 1 year ago

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