Given the following data for year-1:
Profits after taxes = $20 millions; Depreciation = $6 millions; Interest expense = $4 millions; Investment in fixed assets = $12 millions; and Investment in working capital = $4 millions; Calculate the free cash flow (FCF) for year-1:
A) $4 millions
B) $6 millions
C) $10 millions
D) none of the above

Question

Quizplus · Accepted Answer

Free cash flow (FCF) can be calculated using the formula: 
FCF = Profits after taxes + Depreciation - Investment in fixed assets - Investment in working capital

Substituting the given values, we get:

FCF = $20m + $6m - $12m - $4m 
= $10m

Therefore, the correct answer is C) $10 millions.

Given the Following Data for Year-1