Question

The 2013 Income Statement and other selected financial information for Company A, as well as projected amounts for 2014, are shown below. There are no planned gains or losses on disposal of assets in 2014. Assume a tax rate of 35 percent. What is the projected Free Cash Flow (FCF) for 2014? Company A 2013 2014 Revenues 2,000 2,200 Operating Expenses 1,400 1,540 Operating Income 600 660 Interest Expense 100 100 Pretax Income 500 560 Tax Expense 175 196 Net Income 325 364 Depreciation and Amortization 100 100 Capital Expenditure 100 120 Working Capital at Year End 200 220

Answer 1

Answer:

Explanation:

The problem requires excel work so that is why the below picture is attached for good explanation and I hope it helps you. Thank you.

Answer 2

Answer:

The projected Free Cash Flow (FCF) for 2014 is $389

Explanation:

In order to calculate the  projected Free Cash Flow (FCF) for 2014 we would have to use the following formula:

Free Cash Flow 2014=Net income+Interest Expense-tax shield on interest expense+non cash expenses-change in working capital-capital expenditures

tax shield on interest expense=100*0.35=35

Free Cash Flow 2014=$364+$100-$35+$100-$20-$120

Free Cash Flow 2014=$389

The projected Free Cash Flow (FCF) for 2014 is $389