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nikdorinn
2 months ago
14

Champagne, inc., had revenues of $12 million, cash operating expenses of $8 million, and depreciation and amortization of $1.5 m

illion during 2008. the firm purchased $700,000 of equipment during the year while increasing its inventory by $500,000 (with no corresponding increase in current liabilities). the marginal tax rate for champagne is 30 percent. free cash flow: what is champagne's free cash flow for 2008? $4,000,000 $3,250,000 $2,050,000 $2,500,000
Business
1 answer:
harina [3.8K]2 months ago
4 0

The calculation for free cash flow can be summarized as follows:

Revenue 12000000

Subtract: Expense (8000000)

Subtract: Depreciation (1500000)

Earnings Before Tax 2500000

Subtract Tax (750000)

Earnings after tax 1750000

Add Depreciation 1500000

Total Cash Earnings 3250000

Subtract: Change in Working Capital (500000)

Subtract: Asset Purchase (700000)

Free Cash Flow 2050000

Therefore, Free Cash Flow can be computed in this manner.

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The net capital expenditure for Beta is 95.

Explanation:

To determine Beta's net capital expenditure, use the formula below

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= 170 + 75 - 150

= 95

In this computation, the depreciation expense is added, and the PP&E balance is subtracted from the closing PP&E balance to obtain a precise figure.

Alternatively, it can be calculated based on the capital expenditures derived from a company's income statement and balance sheet. Check for the depreciation expense recorded for the current period in the income statement and find the current period’s property, plant, and equipment in the balance sheet.

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I hope this information is beneficial, and now you understand how to approach it. Wishing you a fantastic and joyful day! Also, enjoy the remainder of Black History Month!:-)

- Cutiepatutie ☺❀❤

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