Question

The 2018 income statement for Duffy’s Pest Control shows that depreciation expense was $191 million, EBIT was $492 million, and the tax rate was 35 percent. At the beginning of the year, the balance of gross fixed assets was $1,562 million and net operating working capital was $411 million. At the end of the year, gross fixed assets was $1,803 million. Duffy’s free cash flow for the year was $405 million.

Calculate the end-of-year balance for net operating working capital. (Enter your answer in millions of dollars rounded to 1 decimal place.)

Answer 1

Free cash flows				405
Net income before tax			492
Less: tax @ 35%			172.2
Earnings after tax			319.8
Add: Depreciation			191
Cash from Operations				510.8
Capital spending on Fixed assets				-241
		(1803-1562)
Decrease in Net working capital = Fress cashflows -cash from Operations + Capital spending in fixed assets
			405 -510.8 +241 = 135.2
Net Working capital at the end:
Net Working capital in the beginning				411	million
Less: Decraese in Wworking capital				-135.2	million
Net Working capital at the end:				275.8	million
Answer is $ 275.8 million