Solve the problem below. Use the Free Cash Formula from Chapt 12 to help you. Fr
ID: 2729070 • Letter: S
Question
Solve the problem below. Use the Free Cash Formula from Chapt 12 to help you.
Free CF = NOPAT + Depr Exp – CAPEX – NOWC
Assume that your company had the following numbers at the end of the 3rd Quarter in 2013
Free Cash Flow $75,000; NOPAT $100,000; CAPEX $25,000
No Depreciation and No NOWC
At the end of the 4th Quarter 2013, Free CF increased by 6.0%; CAPEX increased by 20.0% (NO changes to Depreciation or NOWC). What percent did NOPAT decrease or increase by? (show me how you calculated your answer in the Word Doc)
Explanation / Answer
Free cash flow = Nopat + depreciation - capex - Nowc
For 3rd generation ,
Given data , fcfe = nopat - capex
75000 = 100000 - 25000
For 4rth generation
Free cash flow = 75000 × 1.06 = $79500
Capex = 25000 × 1.2 = $30000
Free cash flow = NOPAT - CAPEX
79500 = NOPAT - 30000
NOPAT = 79500 + 30000
= $109500
NOPAT INCREASE % = (109500 - 100000) / 100000
= 9.5%
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.