Question

England Enterprises recently reported operating income of $5.75 million, depreciation of $1.6 million, and had a tax rate of 40%. The firm's expenditures on fixed assets and net operating working capital totaled $1.25 million. How much was its free cash flow, in millions?

Answer 1

Free Cash flow is $3.8 million.

Step-by-step explanation:

Free Cash Flows = PBIT + Depreciation - Tax - changes in Working capital

By putting the values, we have:

Free Cash Flows = 5.75 + 1.6 - (40%* 5.75) - $1.25 = $3.8 million.

So the free cash flows available to firm is $3.8 million.