Question

Tropetech Inc. has an expected net operating profit after taxes, EBIT (1-T), of $11,700 million in the coming year. In addition, the firm is expected to have net capital expenditures of $1,755 million, and net operating working capital (NOWC) is expected to increase by $35 million. How much free cash flow (FCF) is tropetech Inc. expected to generate over the next year?

a. $9,980 million

b. $147,780 million

c. $13,420 million

d. $9,910 million

Answer 1

d. $9,910 million

Step-by-step explanation:

The computation of the free cash flow is shown below:

= Earning before Interest and taxes × ( 1- Tax rate) - change in net operating working capital - net capital expenditures

= $11,700 million - $35 million - $1,755 million

= $9,910 million

While computing the free cash flow we deducted the change in net operating capital and net capital expenditure from the earnings before interest and taxes