1. Given the information below calculate Blue Cloud Computing’s Free Cash Flow (
ID: 2612363 • Letter: 1
Question
1. Given the information below calculate Blue Cloud Computing’s Free Cash Flow (10 Points)
FCF = ((EBIT * (1-Tax Rate) + (Depreciation and Amortization)) - (Capital Expenditures + Change in Net Operating Working Capital))
2014
Net Sales
$3,000.0
Operating costs except depreciation
$2,616.2
Depreciation
$100.0
Operating Income (EBIT)
$283.8
Less Interest
$88.0
Earnings before taxes (EBT)
$195.8
Taxes (40%)
$78.3
Net Income
$117.5
Capital Expenditures
$230.0
Change in Net Operating Working Capital
$150.0
2014
Net Sales
$3,000.0
Operating costs except depreciation
$2,616.2
Depreciation
$100.0
Operating Income (EBIT)
$283.8
Less Interest
$88.0
Earnings before taxes (EBT)
$195.8
Taxes (40%)
$78.3
Net Income
$117.5
Capital Expenditures
$230.0
Change in Net Operating Working Capital
$150.0
Explanation / Answer
EBIT 283.80 Free cash flow = EBIT(1-tax rate) + Depr - (Capital Exp+ Change in NOWC) Free cash flow = 283.8(1-.4) + 100 - (230+150) Free cash flow =170.28 + 100 - (230+150) Free cash flow =270.28 - 380 Free cash flow =109.72
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