Answer:
The correct answer is $500
Step-by-step explanation:
Solution
Given that:
The firm sales =$10,000
EBIT of -= $3000
Depreciation = $400
The firm tax rate is = 30%
Now,
We find the firm's free cash flow which is stated as follows:
The cash flow (free)= EBIT * (1-t) + depreciation + change in working capital
So,
The firm free cash flow = 3000 * (1-30%) + 400 - 2000
= 2100 + 400- 2000
= $500