Question & Answer: 9. What is XYZ Corp.’s 1-EBIT, 2- Net Cash Flow, 3-Operating Cash Flow, and 4-Free Cash Flow, given: (10 points)…..

9. What is XYZ Corp.’s 1-EBIT, 2- Net Cash Flow, 3-Operating Cash Flow, and 4-Free Cash Flow, given: (10 points)

XYZ Corp. (for 2016) Revenue $10,000,000 Wages: $2,000,000

Rent (mixed space, production and administration): $1,000,000 Selling, General, & Administrative Expenses: $3,000,000 D&A: $1,000,000

Property, Plant & Equipment investment: $1,500,000 Tax Rate: 35%

NOWC (2016): $750,000

NOWC (2015): $500,000

Assume no other income, expenses or cash flows.

SHOW ALL WORK

Expert Answer

 

Ans.

1. Calculation of EBIT :-

Revenue : 10,000,000

Less : expenses-

Wages : 2,000,000

Rent : 1,000,000

Selling expenses : 3,000,000

D & A : 1,000,000

EBIT = 3,000,000

2. Calculation of Net Cash flow :

EBIT : 3,000,000

Add: Non Cash expenses

D & A : 1,000,000

Operating profit before working capital changes : 4,000,000

Incease in NOWC (750,000-500,000) : ( 250,000)

Cash generated from operation : 3,750,000

Less : Tax ( 35% of 3,000,000) : 1,050,000

A. Opreting cash flow : 2,700,000

B. Cash flow from investing Activity : Nill

C. Cash flow from financing Activity : Nill

Net Cash Flow (A+B+C) : 2,700,000

3. Calculation of operating cash flow :

As calculated above in point 2 A. : 2,700,000

4. Calculation of free cash flow :

FCF = Operating cash flow – Capital expenses

= 2,700,000 – 1,500,000

1,200,000

Still stressed from student homework?
Get quality assistance from academic writers!