You are considering an investment in Fields and Struthers, Inc. and want to eval

Question

You are considering an investment in Fields and Struthers, Inc. and want to evaluate the firm's free cash flow. From the income statement, you see that Fields and Struthers earned an EBIT of $86 million, had a tax rate of 30 percent, and its depreciation expense was $8 million. Fields and Struthers' gross fixed assets increased by $52 million from 2017 to 2018. The firm's current assets increased by $40 million and spontaneous current liabilities increased by $26 million Calculate Fields and Struthers' operating cash flow for 2018. (Enter your answer in millions of dollars rounded to 1 decimal place.) Operating cash flowmillin Calculate Fields and Struthers investment in operating capital for 2018 (Enter your answer in millions of dollars.) [Investmentinoperating capar- ??1million Calculate Fields and Struthers free cash flow for 2018. (Enter your answer in millions of dollars rounded to 1 decimal place.) Free cash flow million

Explanation / Answer

Operating cash flow for 2018 was:

OCF = NOPAT + Depreciation

= $86m * (1-0.30) + $8m

= $68.2million

Investment in operating capital for 2018 was:

IOC = ?Gross fixed assets + ?Net operating working capital

= 52m + ( 40 - 26 )

= 66 miliion

Free cash flow for 2018 was:

FCF = Operating cash flow – Investment in operating capital

= $68.20 m – $66m

= 2.2 million

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