Question

Lauryn’s Doll Co. had EBIT last year of $56 million, which is net of a depreciation expense of $5.6 million. In addition, Lauryn’s made $5.3 million in capital expenditures and increased net working capital by $2.7 million. Assume that Lauryn’s has a reported equity beta of 1.7, a debt-to-equity ratio of 0.4, and a tax rate of 30 percent. What is Lauryn’s FCF for the year?

Answer 1

Answer:

$36.8 million

Explanation:

The computation of the free cash flow is shown below:

= EBIT × (1 -Tax Rate) + Depreciation & Amortization - Change in Net Working Capital - net capital Expenditure.

= $56 million × ( 1 - 0.30) + $5.6 million - $2.7 million - $5.3 million

= $39.20 million + $5.6 million - $2.7 million - $5.3 million

= $36.8 million

All other information which is given is not relevant. Hence, ignored it