Question

Given the following pattern, please calculate the unlevered free cash flow (all numbers in millions of USD):

- Depreciation and amortization of 520
- Cash taxes of 444
- Cash from working capital of 120
- Capital expenditures of 979
- EBIT of 1,776

a) 1,881
b) 473
c) 993
d) 753

Answer 1

The unlevered free cash flow can be calculated by subtracting cash taxes, depreciation and amortization, change in working capital, and capital expenditures from EBIT.

Step-by-step explanation:

To calculate the unlevered free cash flow, we need to start with EBIT (Earnings Before Interest and Taxes), which is given as $1,776 million. From this, we subtract the cash taxes ($444 million), depreciation and amortization ($520 million), and the change in working capital ($120 million). Finally, we subtract the capital expenditures ($979 million). The calculation is as follows:

Unlevered Free Cash Flow = EBIT - Cash Taxes - Depreciation and Amortization - Change in Working Capital - Capital Expenditures

Unlevered Free Cash Flow = $1,776 million - $444 million - $520 million - $120 million - $979 million

Unlevered Free Cash Flow = -$287 million

Therefore, the correct answer is none of the options provided (a), b), c), or d) ).

Answer 2

Using the provided formula and figures, the Unlevered Free Cash Flow (UFCF) is calculated to be $993 million, so the correct answer is option c) $993 million.

Step-by-step explanation:

Unlevered Free Cash Flow (UFCF) is a financial performance metric that shows how much cash a company is generating before taking into account financial leverage (i.e., debt). To calculate it using the given information, we would follow this formula:

• Start with EBIT (Earnings Before Interest and Taxes)
• Subtract Cash Taxes
• Add Depreciation and Amortization (since it's a non-cash expense)
• Subtract Capital Expenditures (investments in physical assets like equipment)
• Add/Subtract Changes in Working Capital (depending on whether it's a source or use of cash)

Using the provided figures, the calculation is as follows:

1. EBIT: $1,776 million
2. Minus Cash Taxes: $444 million
3. Plus Depreciation and Amortization: $520 million
4. Minus Capital Expenditures: $979 million
5. Add Cash from Working Capital: $120 million

Therefore, the Unlevered Free Cash Flow would be $1,776 + $520 - $444 - $979 + $120 = $993 million.

So the correct answer to the student's question is c) $993 million.