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03 Performance Task 1

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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Katelyn Mae Sungcang
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445 views6 pages

03 Performance Task 1

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.

Uploaded by

Katelyn Mae Sungcang
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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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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