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03 Task Performance 1

The company has an EBIT of P30 million and depreciation of P5 million. It needs to spend P10 million on new assets and P15 million to increase current assets. Accounts payable will increase by P2 million, accruals by P3 million, and notes payable by P8 million. To calculate free cash flow, the company subtracts increases in assets and liabilities from EBIT plus depreciation.

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Dong Rosello
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555 views1 page

03 Task Performance 1

The company has an EBIT of P30 million and depreciation of P5 million. It needs to spend P10 million on new assets and P15 million to increase current assets. Accounts payable will increase by P2 million, accruals by P3 million, and notes payable by P8 million. To calculate free cash flow, the company subtracts increases in assets and liabilities from EBIT plus depreciation.

Uploaded by

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

BM1904

NAME: DATE: SCORE:

Free Cash Flow (20 points)

A company has an EBIT of P30,000,000, 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?

Rubric for grading:


CRITERIA POINTS
Complete solution with correct answer 10
Last two (2) major steps of the solution are incorrect 8
Half of the solution is correct 6
First two (2) major steps of the solution are correct 4
First major step of the solution is correct 2

Reference
Brigham, E. F. & Houston, J. F. (2017). Fundamentals of financial management (concise) (9th ed.). Boston, MA:
Cengage Learning.

03 Task Performance 1 *Property of STI


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