Question

By how much did the firm’s net income exceed its free cash flow?

Please show work step by step if you hand write

if you calculate using excel please reveal formulas so I can learn the necessary step when using excel.

Target recently reported $9,250 of sales

$5,750 of oprating costs other than depreciation

and $700 of depreciation.

zero $0.00 amoritization

$3,200 of outstanding bonds that carry a 5% interest rate

federal-plus-state income tax rate was 35%

In order to sustain its operations and thus generate sales and cash flows in the future, Target was required to make$1,250 of capital expenditures on new fixed assets

and to invest $300 in net operating working capital

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

Free cash flow to Firm = Cash flow available to Firm or all type of investor such as debt holder/Equity holder.

Free cash flow to Equity = Cash flow available to Equity share holder.

Hope this will help, please do comment if you need any further explanation. Your feedback would be appreciated.