Jacobi Inc.recently reported the company made significant upgrades resulting in expenditures on fixed assets and net...

Jacobi Inc.recently reported the company made significant upgrades resulting in expenditures on fixed assets and net operating working capital totaled $1.2 Million. If Jacobi has sales of $4.50 million, variable cost of 40% of sales, depreciation of 1.2 Million and had a tax rate of 30%. How much was its free cash flow, in Millions?

Expert Solution

Particulars	$ in millions
Sales	4.50
Less: Variable costs	1.80
Earnings before depreciation and tax	2.70
Depreciation	1.20
Earnings before tax	1.50
Tax at 30%	0.45
Earnings after tax	1.05
Add back Depreciation *	1.20
Free cash flow	2.25

Therefore, Free cash flow is $2.25 million.

* We add back depreciation because it is a non cash expense but tax deductible.

Excel formula:

jeff jeffy answered 2 years ago

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