A company has EBIT of $30 million, depreciation of $5 million, and a 40% tax rate. It needsto spend $10 million on new fixed assets and $15 million to increase its operating currentassets. It expects its accounts payable to increase by $2 million, its accruals to increase by$3 million, and its notes payable to increase by $8 million. The firm’s current liabilities consistof only accounts payable, accruals, and notes payable. What is its free cash flow?
A company has EBIT of $30 million, depreciation of $5 million, and a 40% tax rate. It needsto spend $10 million on new fixed assets and $15 million to increase its operating currentassets. It expects its accounts payable to increase by $2 million, its accruals to increase by$3 million, and its notes payable to increase by $8 million. The firm’s current liabilities consistof only accounts payable, accruals, and notes payable. What is its free cash flow?
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 20P
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A company has EBIT of $30 million,
to spend $10 million on new fixed assets and $15 million to increase its operating current
assets. It expects its accounts payable to increase by $2 million, its accruals to increase by
$3 million, and its notes payable to increase by $8 million. The firm’s current liabilities consist
of only accounts payable, accruals, and notes payable. What is its
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