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Show your work because i need to know how to do it.

Show your work because i need to know how to do it.

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Answer #1

free cash flow to firm can be known from the below formula:

EBIT *(1-tax)+depreciation- investment in fixed assets - investment in working capital.

EBIT*(1-tax) =>87,000*(1-0.35) 56,550
+ depreciation 16,571
- investment in fixed assets (nil)
-investment in working capital (13,050+6960-6960-4350) (see note) (8,700)
free cash flow 64,421

note:

investment in working capital:

increase in cash 13,050
increase in supplies 6,960
increase in current liabilities for purchasing supplies on credit (6,960)
increase in current liabilities of accruals (4,350)
net increase in working capital 8,700
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