Homework Answers
Free cash flow = Net Income + interest expense - Tax shield on interest expense + Depreciation - Change in (Current assets - current liabilities) - Capital expenditure
Net Income = 20
Interest expense = 9
Tax shield on interest expense = Net interest expense * Tax rate = 9 *8/28 = 2.5714
Depreciation = 6
Current Assets - Current liabilities (beginning ) = 31-23 = 8
Current Assets - Current liabilities (end) = 36-29 = 7
Change in Working capital = 7-8 =-1
Capital expenditure = 97-88 =9
Free cash flow = 20+9 - 2.5714 -(-1) - 9 = 18.4
Free cash flow = 18.4
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