## Question

###### Suppose we’ve been given the following estimatw for a company we are interested in: Revenue: 5,000m...

Suppose we’ve been given the following estimatw for a company we are interested in:

Revenue: 5,000m

Operating Profits: 2,500m

Interest Expense: 500m

Income Taxes: 400m

Net Income: 1,600m

investment in gross property, plant and equipment: $1,200m

investment in net working capital: $100m

net debt issued: $0m

Depreciation: $900m

calculate the companys operating cash flows.

calculate free cash flow to the firm.

## Answers

Calcultion of Operating Cash flows amount in mm

operating profits 2500

less : Taxes -400

_______________________________________

Profit after tax 2100

Add: Depreciation 900

_______________________________________

OCF 3000

_______________________________________

Depreciation is deducted for tax calculation. it is non-cash expenditure. So it will be added back to Calculate annual OCf

Calcultion of free Cash flows

Operating cash flows 3000

Investment in property plant and equipment -1200

Investment in net working capital -100

Free cash flow 1700

Operating Cash flows is $3,000

Free cash flow is $1,700

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