Question
Consider a company with earnings before interest and taxes (EBIT) of $761,000, tax rate of 15%, and reinvestment rate of 66%. How much is its
Consider a company with earnings before interest and taxes (EBIT) of $761,000, tax rate of 15%, and reinvestment rate of 66%. How much is its free cash flow during that period? Round to the nearest cent.
ANSWER IS NOT 646,850
YOU CANNOT USE : FCF= EBIT*(1-tax rate)
but instead the other equation for solving Free cash Flows that includes Reinvestment rate !!!!!!!
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Basic Finance An Introduction to Financial Institutions Investments and Management
Authors: Herbert B. Mayo
10th edition
1111820635, 978-1111820633
