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Suppose we’ve been given the following estimatw for a company we are interested in: Revenue: 5,000m...

Suppose we’ve been given the following estimatw for a company we are interested in:
Revenue: 5,000m
Operating Profits: 2,500m
Interest Expense: 500m
Income Taxes: 400m
Net Income: 1,600m

investment in gross property, plant and equipment: $1,200m
investment in net working capital: $100m
net debt issued: $0m
Depreciation: $900m

calculate the companys operating cash flows.

calculate free cash flow to the firm.
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Answer #1

Calcultion of Operating Cash flows   amount in mm  
operating profits   2500  
less : Taxes   -400  
_______________________________________      
Profit after tax   2100  
Add: Depreciation   900  
_______________________________________      
OCF   3000  
_______________________________________      
      
      
Depreciation is deducted for tax calculation. it is non-cash expenditure. So it will be added back to Calculate annual OCf      
      
Calcultion of free Cash flows      
      
Operating cash flows   3000  
Investment in property plant and equipment   -1200  
Investment in net working capital   -100  
      
Free cash flow    1700  
      
Operating Cash flows is   $3,000  
Free cash flow is   $1,700  
      

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