Free Cash Flow You are considering an investment in Crew Cut, Inc. and want to evaluate...

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Free Cash Flow You are considering an investment in Crew Cut, Inc. and want to evaluate the firms free cash flow. From the i

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Answer 1

Answer #1

Operating cash flow= EBIT (1-Tax rate) + Depreciation

Operating cash flow=(23.19-3.81)+7.81

Operating cash flow=27.19

Investments in operating capital= gross fixed assets + net operating working capital

Investments in operating capital=10.19+(6.19-3.81)

Investments in operating capital=12.57

FCF =Operating cash flow - investments in operating capital

FCF =27.19-12.57

FCF =14.62

Thus the answer is b)

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Answer 2

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