Question

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1

What is the free cash flow of a firm with revenues of $200 million, operating profit margin of 50%, tax rate of 20%, depreciation and amortization expense of $30 million, capital expenditures of $30 million, acquisition expenses of $10 million and change in net working capital of $10 million? Answer in millions, rounded to one decimal place (e.g., $245.63 = 245.6). Numeric Answer:

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just two questions

Answer 1

Answer 1:
Calculation of Free Cash Flows
Revenue		$200 million
Operating Profit Margin		50%
EBIT		$100 million
(Revenue * Operating Profit Margin)
Less:
Tax @ 20%		($20 million)
		$ 80 million
Add: Non-cash expenses
Depreciation & Amortization expenses		$30 million
Less:
Change in working capital		($10 million)
Capital Expenditure		($30 million)
Acquisition expenses		($10 million)
Free cash flows		$60 million
Answer 2:
Calculation of Free Cash Flows
Revenue		$700 million
Operating Profit Margin		50%
EBIT		$350 million
(Revenue * Operating Profit Margin)
Less:
Tax @ 20%		($70 million)
		$ 280 million
Less: Reinvestment cash		($ 224 million)
($280 million * 80%)
Free cash flows		$ 56 million