Don't understanding free cash flows.

haywireII · #1 Jun 25, 2008, 05:49 PM

Last year, Sharpe Radios had a net operating profit after-taxes (NOPAT) of $7.8 million. Its EBITDA was $15.5 million and net income amounted to $3.8 million. During the year, Sharpe Radios made $5.5 million in net capital expenditures (that is, capital expenditures net of depreciation). Finally, Sharpe Radios’ finance staff has concluded that the firm’s total after-tax capital costs were $5.9 million and its tax rate was 40 percent.

Need to understand why the answer is $2.3m.

So far:

EBITA: 15.5
Deprec: 2.5
EBIT/OI: 13
INT: 6.67
EBT: 6.33
TX@40%: 2.53
NI: 3.8

For the formula I'm using FCFR = op cash flow - investment in op capital.

so: [13(1-.4) + 2.5] - [5.5 + X ]

X is what I don't know how to get... it should work out to be 2.5

Any tips on what I'm doing wrong?



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