contestada

This​ year, FCF Inc. has earnings before interest and taxes of ​$10 comma 150 comma 000​, depreciation expenses of ​$1 comma 100 comma 000​, capital expenditures of ​$1 comma 600 comma 000​, and has increased its net working capital by $ 400 comma 000. If its tax rate is 30 %​, what is its free cash​ flow?

Respuesta :

Shahzaibfaraz

Answer:

The free cash flow to the firm or FCFF based on the available data is $6,205,000.

Explanation:

The free cash flow is used in the valuation of the firm and its equity. The free cash flow to the firm can be calculated starting from the EBIT, that is earnings before interest and tax, using the following formula,

FCFF = EBIT * (1-tax rate)  +  Depreciation Expense  -  Capital expenditure  -  Increase in net working capital

FCFF = 10,150,000 * (1-0.3)  +  1,100,000  -  1,600,000  -  400,000

FCFF = $6,205,000