Champagne, Inc., had revenues
January 18th, 2023
Champagne, Inc., had revenues of $14 million, cash operatingexpenses of $9.5 million, and depreciation and amortization of $1.6million during 2018. The firm purchased $650,000 of equipmentduring the year while increasing its inventory by $450,000 (with nocorresponding increase in current liabilities). The marginal taxrate for Champagne is 30 percent. What is Champagne’s cash flowfrom operations for 2018? What is Champagne’s free cash flow for2018?
Answer:
| Revenue | $ 14.00 |
| Cash operating expense | $ 9.50 |
| Depreciation andamortisation | $ 1.60 |
| EBIT | $ 2.90 |
| Less tax @30% | $ 0.87 |
| NetProfit | $ 2.03 |
| Cash flow from operations for2018 | |
| Net Profit | $ 2.03 |
| Add- Depreciation | $ 1.60 |
| Less- Change in workingcapital | $ 0.45 |
| Cashflow fromoperations | $ 3.18 |
| Champagne’s free cash flow for2018 | |
| Net Profit | $ 2.03 |
| Add- Depreciation | $ 1.60 |
| Less- Change in workingcapital | $ 0.45 |
| Less- capital expenditure | $ 0.65 |
| Cashflow fromoperations | $ 2.53 |
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