Calculate a firm's free cash flow if it has net operating profit after taxes of R60,000, depreciation expense of R10,000, net fixed asset investment requirement of R40,000, a net current asset requirement of R30,000 and a tax rate of 30%.
R0
R30,000
-R30,000
R60,000
First, we need to calculate the firm's operating cash flow (OCF):
OCF = Net Operating Profit After Taxes + Depreciation Expense
OCF = R60,000 + R10,000
OCF = R70,000
Next, we need to calculate the firm's capital expenditure (CapEx):
CapEx = Net Fixed Asset Investment Requirement + Net Current Asset Requirement
CapEx = R40,000 + R30,000
CapEx = R70,000
Finally, we can calculate the firm's free cash flow:
Free Cash Flow = OCF - CapEx
Free Cash Flow = R70,000 - R70,000
Free Cash Flow = R0
Therefore, the firm's free cash flow is R0.