This yearCathys Computer Associates will generate sales of $950,000. Cathys operating costs include salaries and...
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This yearCathys Computer Associates will generate sales of $950,000. Cathys operating costs include salaries and rental of office space and computers. Cathy pays salaries and benefits of $425,000 to the professionals that work for her. She rents computers for $70,000 and office space for $105,000 per year. She does not purchase any equipment and takes no depreciation. Cathys tax rate for is 21%. She will invest $79,000 in net working capital over the year. How much will Cathy generate in free cash flow this year?
Using Style:
Sales
-COGS
-SG&AExpenses
- OtherOperatingExpenses
-opportunity cost
-Depreciation
=EBIT or Operating Profit
-Taxes on EBIT
=EBIT(1-T)
+Depreciation
-capital expenditures
-IncreasesinNWC
=Free Cash Flows
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