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Cranny’s Inc. has EBIT of $3932.8 depreciation of $717.3, a tax rate of 0.35, a capital expenditure of $1093.7, and has increased its working capital by $559.5. What is its free cash flow

Cranny’s Inc. has EBIT of $3932.8 depreciation of $717.3, a tax rate of 0.35, a capital expenditure of $1093.7, and has increased its working capital by $559.5. What is its free cash flow

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Cranny’s Inc. has EBIT of $3932.8 depreciation of $717.3, a tax rate of 0.35, a capital expenditure of $1093.7, and has increased its working capital by $559.5. What is its free cash flow?
Expert Solution
Step 1

Free Cash Flows refers to the amount of cash that could be Used/withdrawn without harming a firm's ability to operate and to produce future cash flows.

It can be calculated as follows.

Free Cash Flows = EBIT x (1-Tax) + Depreciation - Capital Expenditure - Net Increase in Working Capital

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