Last year SG Corporation had P5 million in operating income (EBIT). The company had a net depreciation expense of P1 million and an interest expense of P1 million; its corporate tax rate was 40%. The company has P14 million in operating current assets and P4 million in operating current liabilities; it has P15 million in net plant and equipment. It estimates that it has an after-tax cost of capital of 10%. Assume that SG's only noncash item was depreciation. If total net operating capital in the previous year was P24 million, what was the company’s free cash flow (FCF) for the year? Sample format: 1,111,111
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Last year SG Corporation had P5 million in operating income (EBIT). The company had a net
If total net operating capital in the previous year was P24 million, what was the company’s
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