Homework Answers
Answer:
FCFF = EBIT * (1 - Tax rate) + Non cash charges - Capital expenditure - Increase in working capital
Let us calculate EBIT first:
EBIT = (Net Income / (1 - Tax rate)) + Interest expense = (2100 / (1 - 40%)) + 300 = £ 3,800 million
FCFF = EBIT * (1 - Tax rate) + Non cash charges - Capital expenditure - Increase in working capital
= 3800 * (1 - 40%) + 400 - 250 - 0
= £2,430 million
The free cash flow to the firm (FCFF, in £ millions) is = 2,430
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