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

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 $78 million, had a tax rate of 30 percent, and its depreciation expense was $9 million. Fields and Struthers’ gross fixed assets increased by $44 million from 2014 and 2015. The firm’s current assets increased by $32 million and spontaneous current liabilities increased by $22 million. Calculate Fields and Struthers’ operating cash flow for 2015. (Enter your answer in millions of dollars rounded to 1 decimal place.) Calculate Fields and Struthers’ investment in operating capital for 2015. (Enter your answer in millions of dollars.) Calculate Fields and Struthers’ free cash flow for 2015. (Enter your answer in millions of d
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 $78 million, had a tax rate of 30 percent, and its depreciation expense was $9 million. Fields and Struthers’ gross fixed assets increased by $44 million from 2014 and 2015. The firm’s current assets increased by $32 million and spontaneous current liabilities increased by $22 million. Calculate Fields and Struthers’ operating cash flow for 2015. (Enter your answer in millions of dollars rounded to 1 decimal place.) Calculate Fields and Struthers’ investment in operating capital for 2015. (Enter your answer in millions of dollars.) Calculate Fields and Struthers’ free cash flow for 2015. (Enter your answer in millions of d
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 $78 million, had a tax rate of 30 percent, and its depreciation expense was $9 million. Fields and Struthers’ gross fixed assets increased by $44 million from 2014 and 2015. The firm’s current assets increased by $32 million and spontaneous current liabilities increased by $22 million. Calculate Fields and Struthers’ operating cash flow for 2015. (Enter your answer in millions of dollars rounded to 1 decimal place.) Calculate Fields and Struthers’ investment in operating capital for 2015. (Enter your answer in millions of dollars.) Calculate Fields and Struthers’ free cash flow for 2015. (Enter your answer in millions of d

Explanation / Answer

Operating Cash Flows = EBIT * (1 - tax) + Depreciation
Operating Cash Flows = $78 million * (1 - 0.30) + $9 million
Operating Cash Flows = $63.6 million

Investment in Operating Capital = Change in Gross Fixed Assets + Change in Net Working Capital
Investment in Operating Capital = $44 million + ($32 million - $22 million)
Investment in Operating Capital = $54 million

Free Cash Flows = Operating Cash Flows - Investment in Operating Capital
Free Cash Flows = $63.6 million - $54 million
Free Cash Flows = $9.6 million

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