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    03 Performance Task 1

    Uploaded by

    Katelyn Mae Sungcang
    The document calculates the free cash flow of a company. It is given the company's EBIT, depreciation, tax rate, capital expenditures, and changes to current assets and liabilities. It calculates NOPAT, change in net operating working capital, and ultimately the free cash flow as PHP 3,000,000.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    03 Performance Task 1

    Uploaded by

    Katelyn Mae Sungcang
    270 views6 pages
    The document calculates the free cash flow of a company. It is given the company's EBIT, depreciation, tax rate, capital expenditures, and changes to current assets and liabilities. It calculates NOPAT, change in net operating working capital, and ultimately the free cash flow as PHP 3,000,000.

    Original Description:

    Financial Management

    Original Title

    03_Performance_Task_1(3)

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    The document calculates the free cash flow of a company. It is given the company's EBIT, depreciation, tax rate, capital expenditures, and changes to current assets and liabilities. It calculates NOPAT, change in net operating working capital, and ultimately the free cash flow as PHP 3,000,000.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    270 views6 pages

    03 Performance Task 1

    Uploaded by

    Katelyn Mae Sungcang
    The document calculates the free cash flow of a company. It is given the company's EBIT, depreciation, tax rate, capital expenditures, and changes to current assets and liabilities. It calculates NOPAT, change in net operating working capital, and ultimately the free cash flow as PHP 3,000,000.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    You are on page 1of 6

    BM2213

    NAME: Katelyn Mae H. Sungcang DATE: 09/21/2023 SCORE:

    Free Cash Flow (20 points)

    A company has an EBIT of P30,000,000, a depreciation of P5,000,000, and a 40% tax rate. It needs to spend
    P10,000,000 on new fixed assets and P15,000,000 to increase its current assets. It expects its accounts payable to increase
    by P2,000,000, its accruals to increase by P3,000,000, and its notes payable to increase by P8,000,000. The firm’s current
    liabilities consist of only accounts payable, accruals, and notes payable. What is the company’s free cash flow?

    EBIT P30,000,000
    Depreciation P5,000,000
    Fixed Assets (Capital in Expenditures) P10,000,000
    Increase in Current Assets P15,000,000
    Accounts Payable P2,000,000
    Accruals P3,000,000
    Notes Payable P8,000,000
    Current Liability (Accounts Payable + Accruals + Notes Payable) P13,000,000
    Tax @ 40% or 0.40

    NOPAT = EBIT(1 -T)


    = P30,000,000 (1 – 0.40)
    = P18,000,000

    ∆NOWC = Current Assets – (Current Liabilities – Notes Payable)


    = P15,000,000 – (P13,000,000 – P8,000,000)
    = P15,000,000 – P5,000,000
    = P10,000,000

    FCF = [EBIT (1-T) + Depreciation] – (Capital Expenditures + ∆NOWC)


    = [P18,000,000 + P5,000,000] – (P10,000,000 + P10,000,000)
    = P23,000,000 – P20,000,000
    = P3,000,000

    Therefore, the company’s free cash flow is P3,000,000

    Net operating working capital =


    Current Assets – (Current
    Liabilities – Notes payable)

    03 Performance Task 1 *Property of STI


    BM2213

    ∆ NOWC=∆ CA−(∆ CL−∆ Notes


    Payable )
    ∆ NOWC
    = P15,000,000 – (P 13,000,000 –
    P8,000,000)
    ∆ NOWC
    = P15,000,000 – P5,000,000 =
    P10,000,000
    FCF= EBIT (1-T) + Depreciation
    & Amortization – (Capital
    Expenditures + Net Operating
    Working Capital)

    03 Performance Task 1 *Property of STI


    BM2213

    FCF= [P30,000,000 (1- 0.4) +


    P5,000,000] – (P10,000,000 +
    P10,000,000)
    FCF= P18,000,000 + P5,000,000 -
    P20,000,000
    FCF= P 3,000,00
    ∆ NOWC=∆ CA−(∆ CL−∆ Notes
    Payable )
    ∆ NOWC
    = P15,000,000 – (P 13,000,000 –
    P8,000,000)
    ∆ NOWC
    = P15,000,000 – P5,000,000 =
    P10,000,000
    03 Performance Task 1 *Property of STI
    BM2213

    FCF= EBIT (1-T) + Depreciation


    & Amortization – (Capital
    Expenditures + Net Operating
    Working Capital)
    FCF= [P30,000,000 (1- 0.4) +
    P5,000,000] – (P10,000,000 +
    P10,000,000)
    FCF= P18,000,000 + P5,000,000 -
    P20,000,000
    FCF= P 3,000,0
    ∆ NOWC=∆ CA−(∆ CL−∆ Notes
    Payable )
    ∆ NOWC

    03 Performance Task 1 *Property of STI


    BM2213

    = P15,000,000 – (P 13,000,000 –
    P8,000,000)
    ∆ NOWC
    = P15,000,000 – P5,000,000 =
    P10,000,000
    FCF= EBIT (1-T) + Depreciation
    & Amortization – (Capital
    Expenditures + Net Operating
    Working Capital)
    FCF= [P30,000,000 (1- 0.4) +
    P5,000,000] – (P10,000,000 +
    P10,000,000)
    FCF= P18,000,000 + P5,000,000 -
    P20,000,000

    03 Performance Task 1 *Property of STI


    BM2213

    FCF= P 3,000,0

    03 Performance Task 1 *Property of STI

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