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Shrives Publishing recently reported $11,500 of sales, $5,500 of operating costs other than depreciation, and $1,250...
Shrives Publishing recently reported $11,500 of sales, $5,500 of operating costs other than depreciation, and $1,250 of depreciation. The company had $3,500 of bonds that carry a 6.25% interest rate, and its federal-plus-state income tax rate was 25%. During the year, the firm had expenditures on fixed assets and net operating working capital that totaled $1,550. These expenditures were necessary for it to sustain operations and generate future sales and cash flows. What was its free cash flow? (Round your intermediate and final answers to whole dollar amount.)
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Expert Solution
Answer : Calculation of Free Cash Flow
Free Cashflow = [EBIT * (1 - Tax rate)] + Depreciation - ( Capex + Working Capital)
EBIT = Sales - Operating Cost other than Depreciation- Depreciation
= 11500 - 5500 - 1250
= 4750
Free Cashflow = [4750 * (1 - 0.25)] + 1250 - 1550
= 3562.50 + 1250 - 1550
= 3262.50
jeff jeffy answered 2 years agoRelated Solutions
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