Question

Free Cash Flow The following information is derived from recent financial statements of BizInc Corp.: EBIT for 2014 was $159, and Depreciation Expense for 2014 was $41. The firm's tax rate is 26%. Net Operating Working Capital (NOWC) for end of year 2013 was $63, and NOWC for end of year 2014 was $65. Net fixed assets for EOY 2013 were $124 and they were $322 for EOY 2014. All dollar figures for this question are in $Millions -- you should disregard units in all figures, including your response. The Free Cash Flow for 2014 was $_________(million).

Answer 1

The Free Cash Flow for 2014 was ($41.34 million)

Step-by-step explanation:

Value of free cash flow = EBIT (1 - tax rate) + Depreciation - Capital expenditure - Working capital

= $159 million ( 1 - 0.26) + $41 million - ($322 million - $124 million) - ($65 million - $63 million)

= $159 million (0.74) + $41 million - $198 million - $2 million

= $117.66 million + $41 million - $198 million - $2 million

= -$41.34 million.