. Bartling Energy Systems recently reported $9,250 of sales, $5,750 of operating costs other than depreciation, and $700 of depreciation. The company had no amortization charges, it had $3,200 of outstanding bonds that carry a 5% interest rate, and its federal-plus-state income tax rate was 35%. In order to sustain its operations and thus generate sales and cash flows in the future, the firm was required to make $1,250 of capital expenditures on new fixed assets and to invest $300 in net operating working capital. By how much did the firm's net income exceed its free cash flow?
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Expert's answer
2012-10-18T08:05:38-0400
Bonds $3,200.00
Interest rate 5.00%
Tax rate & 35.00%
Required capital expenditures (fixed assets) $1,250.00
Required addition to net operating working capital& $300.00
Sales $9,250.00
Operating costs excluding depr'n $5,750.00
Depreciation $700.00
Operating income (EBIT) $2,800.00
Interest charges $160.00
Taxable income (EBT) & $2,640.00
Taxes & $924.00
Net income after taxes & $1,716.00
&
FCF =& BIT(1 – T) + Depr'n – Cap Ex – Δ Net Op WC
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