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QUESTION 13 What's the FCFF of a company with total revenues of $200 million, gross profit...

QUESTION 13

  1. What's the FCFF of a company with total revenues of $200 million, gross profit margin of 60%, operating profit margin of 35%, net profit margin of 5%, tax rate of 30%, depreciation and amortization of $40 million, capital expenditures of $80 million, acquisition costs of $20 million and a decline in net working capital of $10 million?

    a. -$8 million

    b. -$1 million

    c. $6 million

    d. $13 million

    e. $20 million
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Answer #1

Free CashFlow to Firm (FCFF) = NOPAT + Depreciation & Amortization - Captial Expenditures - Net working capital Requirement

Net Operating Profit after Tax = Operating Profit x (1 -Tax)

Net Operating Profit after Tax = Revenue x Operating Profit Margin x (1 -Tax)

Net Operating Profit after Tax = $49million

Free CashFlow to Firm (FCFF) = NOPAT + Depreciation & Amortization - Captial Expenditures - Net working capital Requirement

Free CashFlow to Firm (FCFF) = 49 + 40 - (80+20) - (-10)

Free CashFlow to Firm (FCFF) = 49 + 40 - (80+20) + 10

Free CashFlow to Firm (FCFF) = -$1million

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