Question

Brooks Sisters' operating income (EBIT) is $168 million. The company's tax rate is 40.0%, and its operating cash flow is $142.1 million. The company's interest expense is $17 million. What is the company's net cash flow? (Assume that depreciation is the only non-cash item in the firm's financial statements.) (Answers are in $ millions.)

Answer 1

Step-1:Calculation of depreciation expense
Operating cash flow	=	EBIT*(1-Tax rate)	+	Depreciation
$ 142.10	=	168*(1-0.40)	+	Depreciation
$ 142.10	=	$ 100.80	+	Depreciation
Depreciation	=	$    41.30
Step-2:Calculation of Company's net cash flow
EBIT		$ 168.00
Less:
Interest		$    17.00
Earning Before Tax		$ 151.00
Less:
Tax Expense		$    60.40
Net Income		$    90.60
Add:
Depreciation		$    41.30
Net Cash flow		$ 131.90

Answer is in million