This year, The Boring Company, has an EBIT of $100m, interest expenses of $40m, depreciation expenses of $15m and capital expenditures of $30 million, and has increased its net working capital by $5m. Its tax rate is 35%. Compute earnings and free cash flow.

This year, The Boring Company, has an EBIT of $100m, interest expenses of $40m, depreciation expenses of $15m and capital expenditures of $30 million, and has increased its net working capital by $5m. Its tax rate is 35%. Compute earnings and free cash flow.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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