The free cash flow to the firm is reported as $302 million

Finance Dec 26, 2020

The free cash flow to the firm is reported as $302 million. The interest expense to the firm is $60 million. If the tax rate is 35% and the net debt of the firm increased by $33 million, what is the free cash flow to the equity holders of the firm? $296 million $305 million $269 million $327 million

Expert Solution

Free cash flow to equity = Free cash flow - interest(1 - tax) + increase in debt

Free cash flow to equity = 302 - 60(1 - 0.35) + 33

Free cash flow to equity = 302 - 39 + 33

Free cash flow to equity = $296 million

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