Question

The 2018 income statement for Duffy’s Pest Control shows that depreciation expense was $190 million, EBIT was $490 million, and the tax rate was 34 percent. At the beginning of the year, the balance of gross fixed assets was $1,560 million and net operating working capital was $410 million. At the end of the year, gross fixed assets was $1,800 million. Duffy’s free cash flow for the year was $410 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				410
Net income before tax			490
Less: tax @ 34%			166.6
Earnings after tax			323.4
Add: Depreciation			190
Cash from Operations				513.4
Capital spending on Fixed assets				-240
		(1800-1560)
Decrease in Net working capital = Fress cashflows -cash from Operations + Capital spending in fixed assets
			410-513.40 +240 =		136.6
Net Working capital at the end:
Net Working capital in the beginning				410	million
Less: Decraese in Wworking capital				136.6	million
Net Working capital at the end:				273.4	million
Answer is $ 273.4 million