Calculate cash flow from assets given the following information: EBIT = $1,000; depreciation = $100; taxes = $240; beginning fixed assets = $30,000; ending fixed assets = $40,000; beginning net working capital = $10,000; ending net working capital = $8,000.

Question

Quizplus · Accepted Answer

Cash flow from assets = Operating cash flow - Net capital spending - Changes in net working capital. Operating cash flow = EBIT + Depreciation - Taxes = $1,000 + $100 - $240 = $860. Net capital spending = Ending fixed assets - Beginning fixed assets = $40,000 - $30,000 = $10,000. Changes in net working capital = Ending NWC - Beginning NWC = $8,000 - $10,000 = -$2,000. Cash flow from assets = $860 - $10,000 - (-$2,000) = $860 - $10,000 + $2,000 = -$7,240.

Calculate Cash Flow from Assets Given the Following Information: EBIT