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Company X finances only with debt and common equity (i.c., no preferred stock). Last year, Company X had $3.5 million in operating income and

 

Company X finances only with debt and common equity (i.c., no preferred stock). Last year, Company X had $3.5 million in operating income and $250,000 in depreciation expense. Its interest expense was $750,000 and its corporate tax rate was 37%. At year-end of 2018, it had $3,000,000 in current assets, $800,000 in accounts payable, $600,000 in accruals, $1,250,000 in notes payable, and $5,000,000 in net plant and equipment. The firm has no other current liabilities. Assume Company X's only noncash item was depreciation. a) What was the company's net income? b) What was its net operating working capital? 3 c) What was its net working capital? d) Assume the company had $4 million in net plant and equipment over the prior year (end of 2017) and that its net operating working capital has remained constant over time. What is the company's free cash flow (FCF) for the year that just ended?

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