Answer: $99,964
Explanation:
Given that,
EBIT = $135,000
Corporate tax rate = 35% of $135,000 = $47,250
Depreciation = $25,714
Need additional cash = $20,250
Additional supplies = $10,800
Accrual including taxes and wage payable will increase by $6,750
Operating cash flow = EBIT - Taxes + Depreciation
= $135,000 - $47,250 + $25,714
= $113,464
Investment in operating capital = Additional capital expenditure + Increase in NWC( net working capital)
= $0 + [($20,250 + $10,800) - ($10,800 + $6750)
= $13,500
Free Cash Flow (FCF) = Operating cash flow - Investment in operating capital
= $113,464 - $13,500
= $99,964
