You are considering an investment in Cruise, Inc. and want to evaluate the firm\
ID: 2732200 • Letter: Y
Question
You are considering an investment in Cruise, Inc. and want to evaluate the firm's free cash flow. From the income statement, you see that Cruise earned an EBIT of $202 million, paid taxes of $51 million, and its depreciation expense was $75 million. Cruise's gross fixed assets increased by $70 million from 2012 to 2013. The firm's current assets decreased by $10 million and spontaneous current liabilities increased by $6 million. What is Cruise's operating cash flow, investment in operating capital, and free cash flow for 2013, respectively, in millions?
Explanation / Answer
Answer: $226, $54, $172
Operating cash Flow=EBIT+Dep-taxes
=$202+$75-$51
=$226 million
Investment in operating capital=Gross fixed asset-Decrease in current assets-Increase in current liability
=$70-$10-$6
=$54 million
Free cash Flow=Operating cash Flow-Investment in operating capital
=$226-$54
=$172 million
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.