Series 79 practice questionhardFree Cash Flow Calculation
A company has EBIT of $100 million, tax rate of 30%, depreciation of $10 million, capital expenditures of $20 million, and no change in working capital. What is its free cash flow (FCF)?
- A$60 million✓ Correct answer
- B$70 million
- C$80 million
- D$90 million
Explanation
Why A — $60 million
FCF = EBIT × (1 - tax rate) + depreciation - capex = $100m × 0.7 = $70m + $10m - $20m = $60m. The other figures do not account for all adjustments.
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