Respuesta :
The firm's free cash flow is $296.5
The cash generated from the core operations of a business is calculated in the operating cash flow statement and robust operating cash flows are critical for the company's fundamentals and valuation. High operating cash flows allow the company to fund growth using internal funding rather than the use of leverage or issuing equity.
Earnings Before Interest and Tax = $350
Tax Rate = 21%
Therefore,
Net Income = Earnings Before Interest and Tax * ( 1 - Tax Rate )
Net Income = 350 * ( 1 - 0.21 )
Net Income = $276.5
The operating cash flow can be calculated as follows -
Operating Cash Flow = Net Income + Depreciation + Decrease in Net Working Capital
Operating Cash Flow = 276.5 + 50 + 40
Operating Cash Flow = $366.5
The free cash flow is calculated from the operating cash flow and capital expenditure as follows -
Free Cash Flow = Operating Cash Flow - Capital Expenditure
Free Cash Flow = 366.5 - 70
Free Cash Flow = $296.5
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