Question

What is the free cash flow of a firm with revenues of $314 million, operating profit margin of 39%, tax rate of 29%, depreciation and amortization expense of $24 million, capital expenditures of $36 million, acquisition expenses of $7 million and change in net working capital of $16 million

Answer 1

$51.95 million

Step-by-step explanation:

We are given;

Revenues = $314 million

operating profit margin = 39%

tax rate = 29%

depreciation & amortization expense = $24 million

capital expenditures = $36 million, acquisition expenses = $7 million change in net working capital = $16 million

Now, tax rate = 29%

Thus, profit after tax = 314 - (314 × 29%) = $222.94

operating profit margin is 39%. Thus, net income = 39% × $222.94 = $86.95

Formula for free cash flows is;

Free cash flow = Net income + Depreciation & amortization expenses - changes in net working capital - capital expenditures - acquisition expenses

Thus;

Free cash flow = 86.95 + 24 - 16 - 36 - 7 = $51.95 million