Question

You are considering an investment in Cruise, Inc. and want to evaluate the firm's free cash flow. From the income statement, you see that Cruise earned an EBIT of $206 million, paid taxes of $47 million, and its depreciation expense was $71 million. Cruise's gross fixed assets increased by $74 million from 2007 to 2008. The firm's current assets decreased by $14 million and spontaneous current liabilities increased by $6.4 million. What is Cruise's operating cash flow, investment in operating capital and free cash flow for 2008, respectively in millions?

Answer 1

Answer:

$230 million , $176.40 million

Explanation:

The operating cash flow is shown below:

= EBIT + Depreciation - Income tax expense  

= $206 million +$71 million - $47 million

= $230 million

The computation of the free cash flow is shown below:

= Operating cash flows + Change in Net Working Capital - net capital Expenditure.

= $230 million + 20.4 million - $74 million

= $176.40 million