Bubba Ho-Tep Company reported net income of $300 million for the most recent fiscal year.The firm had depreciation expenses of $125 million and capital expenditures of $150 million.Although it had no interest expense,the firm did have an increase in net working capital of $20 million.What is Bubba Ho-Tep's free cash flow?

Question

Quizplus · Accepted Answer

Free cash flow measures the amount of cash a company has left after accounting for its capital expenditures and working capital needs.

Free cash flow = Net Income - (Capital Expenditures + Depreciation) +/- Change in Net Working Capital

Plugging in the given values, we get:

Free cash flow = $300 million - ($150 million + $125 million) + $20 million 
Free cash flow = $25 million + $20 million 
Free cash flow = $45 million

Therefore, the correct answer is B) $255 million.

Bubba Ho-Tep Company Reported Net Income of $300 Million for the Most