Question

Consider a company with earnings before interest and taxes (EBIT) of $579,000, tax rate of 11%, depreciation and amortization expenses of $77,000, capital expenditures of $63,000, acquisition expenses of $47,000 and change in working capital of $31,000. How much is its free cash flow during that period? Round to the nearest cent.

Answer 1

To calculate the free cash flow, subtract the capital expenditures and change in working capital from the earnings before interest and taxes (EBIT). In this case, the free cash flow is approximately $247,190.

Step-by-step explanation:

To calculate the free cash flow, you need to subtract the capital expenditures and change in working capital from the earnings before interest and taxes (EBIT). The formula is: Free Cash Flow = EBIT - Tax - Depreciation and Amortization - Capital Expenditures - Change in Working Capital.

Using the given information, the calculation would be: $579,000 - 11% of $579,000 - $77,000 - $63,000 - $31,000.

After performing the calculations, the free cash flow for the period is approximately $247,190.