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You have the following information for company XYZ
You have the following information for company XYZ.
|
Ending NWC |
100 |
|
Beginning NWC |
120 |
|
Net Capital Spending |
200 |
|
Depreciation |
30 |
|
Taxes |
50 |
|
Interest Paid |
20 |
|
Dividends Paid |
20 |
|
EBIT |
400 |
You need to calculate the free cash flow (cash flow from assets).
Expert Solution
Free cash flow = Net income - (non cash expenses + changes in working capital + capital expenditure)
Free cash flow = 330 -(30 -20 +200)
Free cash flow =330-210 =120
NET INCOME = EBIT - INTEREST - TAXES = 400-20-50=330
NON CASH expenses - 30 (depreciation)
changes in working capital =100-120 =-20 (end working capital - begin working capital;)
capital expenditure = 200 (depreciation has not been added as it is net capital spending i.e. assumed that depreciation has already adjusted)
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