Determine the free cash flow to the firm using the following information:
Net Income: $100
Investment in Positive NPV Project: $9
Increase in Working Capital: $6
Depreciation Expense: $15
Interest Expense: $11
Tax Rate: 30%
Free Cash Flow:
The excess of cash flow over the capital expenditures made during the period and the dividend paid if any is called free cash flow. The free cash flow is useful to determine the value of a stock and also the value of a firm.
Answer and Explanation: 1
The free cash flow is $100.
|Increase in working capital||($6)|
|Operating cash flow||$109|
|Investment in Positive NPV Project||($9)|
|Free cash flow||$100|
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fromChapter 8 / Lesson 14
Learn about types of cash flow. Study the cash flow definition in business, discover cash flow examples, and examine how to use the total cash flow formulae.