What is free cash flow for company

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Reference no: EM132806782

Problem 1: A company has revenue of $1,000, COGS of $400, SG& A of $150, Depreciation of $50 and Interest Expense of $20. Last year, the Net Operating Working Capital was $200, and this year, it is $240. Further, Capex is $100 during this year. The appropriate tax rate is 35%. What is the Free Cash Flow?

i) $170

ii) -$30

iii) $157

iv) $139.5

Problem 2: A company's market-to-book ratio is higher than peer firms (comparable firms). Which of the following is most likely to be the case? (ceteris peribus - meaning, all else equal!)

i) Growth opportunities for this company is higher

ii) The Debt-to-Equity ratio for this firm is higher

iii) The current period's free cash flows are lower

iv) The degree of operating leverage for this company is lower

Reference no: EM132806782

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