maryli

Here's an example from the Corp Fin part of QBank:

Gambit Enterprises is being evaluated as an acquisition target. For the upcoming year an analyst has estimated the following values: net income = $300m, net interest after tax = $100m, change in deferred taxes = +$25m, depreciation = $200m, change in net working capital = +$30m, CAPEX = $250m. Calculate the firm’s estimated free cash flow.

A) $295m.

B) $405m.

C) $345m.


Your answer: C was correct!


Net income + net interest after tax = 300m + 100m = $400m = unlevered net income.
Unlevered net income + change in deferred taxes = 400m + 25m = $425m = NOPLAT.
NOPLAT + depreciation – change in net working capital – CAPEX = 425m + 200m – 30m – 250m = $345m = FCF.