You are considering an investment in Fields and Struthers, Inc., and want to evaluate the firm's free cash flow. From the income statement, you see that Fields and Struthers earned an EBIT of $64 million, had a tax rate of 30 percent, and its depreciation expense was $5 million. Fields and Struthers' gross fixed assets increased by $30 million from 2014 and 2015. The firm's current assets increased by $26 million and spontaneous current liabilities increased by $15 million. a. Calculate Fields and Struthers' operating cash flow for 2015. b. Calculate Fields and Struthers' investment in operating capital for 2015. c. Calculate Fields and Struthers' free cash flow for 2015.
You are considering an investment in Fields and Struthers, Inc., and want to evaluate the firm's free cash flow. From the income statement, you see that Fields and Struthers earned an EBIT of $64 million, had a tax rate of 30 percent, and its depreciation expense was $5 million. Fields and Struthers' gross fixed assets increased by $30 million from 2014 and 2015. The firm's current assets increased by $26 million and spontaneous current liabilities increased by $15 million. a. Calculate Fields and Struthers' operating cash flow for 2015. b. Calculate Fields and Struthers' investment in operating capital for 2015. c. Calculate Fields and Struthers' free cash flow for 2015.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:You are considering an investment in Fields and Struthers, Inc., and want to
evaluate the firm's free cash flow. From the income statement, you see that
Fields and Struthers earned an EBIT of $64 million, had a tax rate of 30 percent,
and its depreciation expense was $5 million. Fields and Struthers' gross fixed
assets increased by $30 million from 2014 and 2015. The firm's current assets
increased by $26 million and spontaneous current liabilities increased by $15
million.
a. Calculate Fields and Struthers' operating cash flow for 2015.
b. Calculate Fields and Struthers' investment in operating capital for 2015.
c. Calculate Fields and Struthers' free cash flow for 2015.
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