Question

Johnson's Nursery has net income of $42,500, depreciation expense of $1,800, interest expense of $900, taxes of $1,600, additions to net working capital of $2,300, and capital expenditures of $11,700. What is the amount of the free cash flow?

Answer 1

The free cash flow for Johnson's Nursery is $30,300, calculated by adjusting the net income with depreciation expense, changes in net working capital, and capital expenditures.

Step-by-step explanation:

The student has asked for help in calculating the free cash flow for Johnson's Nursery, given several financial figures. To find the free cash flow (FCF), we need to adjust the net income for non-cash expenses, changes in net working capital, and capital expenditures. The formula to calculate FCF is:

Free Cash Flow = Net Income + Depreciation Expense - Additions to Net Working Capital - Capital Expenditures

Using the numbers provided by the student:

Net Income = $42,500

Depreciation Expense = $1,800

Additions to Net Working Capital = $2,300

Capital Expenditures = $11,700

These lead to the following calculation:

FCF = $42,500 + $1,800 - $2,300 - $11,700 = $30,300

The amount of the free cash flow for Johnson's Nursery is $30,300.

Answer 2

free cash flow is $31167.35

Step-by-step explanation:

given data

net income = $42,500

depreciation expense = $1,800

interest expense = $900

taxes = $1,600

net working capital = $2,300

to find out

What is the amount of the free cash flow

solution

we know that FCF free cash flow formula that is

FCF = Net income + depreciation - net working capital - capital expenditures + interest expense × ( 1 - tax rate) ........................1

here tax rate is calculate as

tax rate = tax paid ÷ (net income + taxes paid)

so here from equation 1 we get FCF

free cash flow =42,500 + 1,800 - 2,300 - 11,700 + 900 × (1 -
`(1600)/(1600+42500)`)

free cash flow = 31167.35

so free cash flow is $31167.35