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

What's the FCFF of a company with total revenues of $200 million, gross profit margin of 60%, operating profit margin of 40%, 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 = $200 million x 40% x (1-30%)

Net Operating Profit after Tax = $56million

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

Free CashFlow to Firm (FCFF) = 56 + 40 - (80+20) - (-10)

Free CashFlow to Firm (FCFF) = 56 + 40 - (80+20) + 10

Free CashFlow to Firm (FCFF) = $6 million

Therefore, option c is correct.

Thumbs up please if satisfied. Thanks :)

Comment if further doubts in above.

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