Question

Gustav’s best friend, Garfield, owns a lasagna factory. Garfield’s financial skills are not very strong, so he asked Gustav to take a look at his financials. Here is the information Garfield provided to Gustav for 2019.  

• Sales were $23,730;

• COGS were $16,780;

• Depreciation was $2,840;  

• Interest paid was $414;  

• Tax rate was 35%

• The paid dividends were $616.  

Garfield also gathered some balance sheet information for 2018 and 2019. The numbers are presented in the following table.

	December 31, 2018	December 31, 2019
Current Assets	$2,940	$3,528
Net Fixed Assets	$16,560	$18,840
Current Liabilities	$2,592	$2,484

Because Gustav is very busy following the current market developments, he asked you to help him. You must  

1. Calculate his EBIT

2. Calculate his EBT

3. Calculate his Taxes

After showing all work for the above, please find

4. NI

5. OCF

6. FCF

Answer 1

Solution Sales cogs Depreciation Interest $ 93,730 $16,780 $2,840 $414 - Sales - Cogs - Depreciation < $23,730 - $ 16,780 - $ 2,840 = $4,110 U Calculate EBT (Ewining Before Tax >> - EBIT – Interest Expense = $ 3,696. ) Calculate Taxes =) Tax Rate = 35% of EBT So, Tax= 35 od $ 3,696 = $ 1,294.60 1.

lg calculate NI ( Net Income) =) = EBT - Taxes = $3696- $1,294.60 = $ 2,408.40 ♡ Calculate OCf Coperating cash flow)!- = = = Net Income + Interest (1 - Tax Rate ) + Depreciation = $ 8,402.40 + $414 (1-0.35) + $ 2,840 = $2,402.40 + $414(0.65) + $ 2,840 = $ 2,402.40 + $ 269.10+ $ 2,840 = $ 5,511,50 vi) Calculate ACF ( free cash flow)! . = = = = = · FCF = OLF - Capital Expenditure - Increase in I working capital So, we have to calculate capital expenditure and increase in wooting capital.

Capital Expenditure » : = Net fixed Assets in Dee 2019 - Net fixed Asset in December 2018 = $ 18,840 - $ 16,560 = $ 2,280 Increase in working capital/ if(current Asset in dolg) – (current liabilities in 2017– (current Assets in 2018) – (current liabilities in 2018)] - | $3,528 – $2,484] - [ $2,940 – $2,592] $348 = $ 1044 - = $ 696 Putting the values computed in FCF formulas FCF = $ 5,510.50 – $2,280 - $696 = $ 2,534.50