A firm has sales of $11,324, EBIT of $3,333, depreciation of $4,850, and fixed assets increased...

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A firm has sales of $11,324, EBIT of $3,333, depreciation of $4,850, and fixed assets increased by $3,118. If the firms tax

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Answer 1

Answer #1

Free Cash Flow of the firm = EBIT*(1 -Tax rate) + Depreciation (+ -) WC changes - Capital Exp

Given:

EBIT = $3,333

Depreciation = $4,850

Change in Working Capital = 0

Increase in Fixed Asset =$3,118

Tax rate =30%

Now, using the formula,

Free Cash Flow to the Firm = 3,333*(1 - 0.3) + 4,850 (+ -) 0 - 3118

Free Cash flow to the Firm = $4065.10 or $4065(rounding off) (Answer)

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Answer 2

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A firm has sales of $11,324, EBIT of $3,333, depreciation of $4,850, and fixed assets increased...