Bartling Energy Systems recently reported $9,250 of sales, $5,750 of operating costs other than depreciation, and $700 of depreciation. The company had no amortization charges, it had $3,200 of outstanding bonds that carry a 5% interest rate, and its federal-plus-state income tax rate was 35%. In order to sustain its operations and thus generate sales and cash flows in the future, the firm was required to make $1,250 of capital expenditures on new fixed assets and to invest $300 in net operating working capital. By how much did the firm's net income exceed its free cash flow? Problem 5Bartling Energy Systems recently reported $9,250 of sales, $5,750 of operating costs other than depreciation, and $700 ofdepreciation. The company had no amortization charges, it had $3,200 of outstanding bonds that carry a 5% interest rate,and its federal-plus-state income tax rate was 35%. In order to sustain its operations and thus generate sales and cash flows inthe future, the firm was required to make $1,250 of capital expenditures on new fixed assets and to invest $300 in netoperating working capital. By how much did the firm's net income exceed its free cash flow?

Answered: Bartling Energy Systems recently…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter6: Accounting For Financial Management

Section: Chapter Questions

Problem 11P: The Berndt Corporation expects to have sales of 12 million. Costs other than depreciation are...

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Bartling Energy Systems recently reported $9,250 of sales, $5,750 of operating costs other than depreciation, and $700 of depreciation. The company had no amortization charges, it had $3,200 of outstanding bonds that carry a 5% interest rate, and its federal-plus-state income tax rate was 35%. In order to sustain its operations and thus generate sales and cash flows in the future, the firm was required to make $1,250 of capital expenditures on new fixed assets and to invest $300 in net operating working capital. By how much did the firm's net income exceed its free cash flow?

Problem 5
Bartling Energy Systems recently reported $9,250 of sales, $5,750 of operating costs other than depreciation, and $700 of
depreciation. The company had no amortization charges, it had $3,200 of outstanding bonds that carry a 5% interest rate,
and its federal-plus-state income tax rate was 35%. In order to sustain its operations and thus generate sales and cash flows in
the future, the firm was required to make $1,250 of capital expenditures on new fixed assets and to invest $300 in net
operating working capital. By how much did the firm's net income exceed its free cash flow?

Expert Solution

Step 1

Sales = 9250

Operating cost other than depreciation = (5750)

Depreciation = (700)

Free Cash flow (FCFF)

= Net Income + Interest (1-t) – Net Investment- Net Change in Working capital

= Net Income + Interest (1-t) – [ Capex – Depreciation] – Net Change in Working capital

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