Homework SourseBased on the following data what is the free cash flows for
Based on the following data, what is the free cash flows for year 1?
Year = 1
Revenue = 650.00
Other income = 15.00
Fixed Costs = 80.00
Variable costs = 250.00
Additional investment in NWC = 5.00
Additional investment in operating long term assests = 80.00
Depreciation = 75.00
Tax Rate = .40
A. $121
B. $137
C $116
D $103
E. $146
Solution
Calculation of free cash flows for year 1:
Correct Option is E) $146
| Particulars | Amount ($) |
| Revenue | 650 |
| Other Income | 15 |
| - Fixed Costs | -80 |
| - Variable Costs | -250 |
| -Depreciation | -75 |
| Net Profit | 260 |
| -Taxes (0.4) | -104 |
| Net Income | 156 |
| Depreciation | 75 |
| -Additional Investment in NWC | -5 |
| -Additional Investment in operating long term assets | -80 |
| Free Cash Flows | 146 |
