Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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?
Step by Step Solution
★★★★★
3.43 Rating (162 Votes )
There are 3 Steps involved in it
Step: 1
To calculate the required values well go step by step a Net Income Net Income can be calculated using the formula Net Income Operating Income Interest ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started