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Marina86 [1]
2 years ago
8

You are considering an investment in Crew Cut, Inc. and want to evaluate the firm's free cash flow. From the income statement, y

ou see that Crew Cut earned an EBIT of $23.18 million, paid taxes of $3.82 million, and its depreciation expense was $7.82 million. Crew Cut's gross fixed assets increased by $10.18 million from 2017 to 2018. The firm's current assets increased by $6.18 million and spontaneous current liabilities increased by $3.82 million. What is Crew Cut's operating cash flow, investment in operating capital and free cash flow for 2018, respectively in millions
Business
1 answer:
forsale [732]2 years ago
7 0

Answer:

See below

Explanation:

•Crew Cut's operating cash flow was;

Operating cash flow = EBIT - Taxes + Depreciation

= $23.18 million - $3.82 million + $7.82 million

= $27.18 million

• Investment in operating capital for 2018

Investment in operating capital = Change in gross fixed assets + Change in net working capital

= $10.18 million + ($6.18 million - $3.82 million)

= $10.18 million + $2.36 million

= $12.54 million

• Free cash flow for 2018

Free cash flow = Operating cash flow - Investment in operating capital

= $27.18 million - $12.54 million

= $14.64 million

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