Blur Corp. has an expected net operating profit after taxes, EBIT(1 – T), of $7,600 million in the coming year. In addition, the firm is expected to have net capital expenditures of $1,140 million, and net operating working capital (NOWC) is expected to increase by $10 million. How much free cash flow (FCF) is Blur Corp. expected to generate over the next year?

Free cash flow (FCF) for next year = $ 6,450  million

Explanation:

Free cash flow represents the amount that is left to all the providers of capital after the payment of all all operating expenses, working capital and investment in fixed asset expenditures.

It is computed as cash flow made from operation less capital expenditures

For Blur Communications

The Free cash flow

= EBIT (1-T) - increase in capital expenditure - increase in working capital

= 7600 - $1,140 - 10

= $ 6,450  million

Free cash flow (FCF) for next year = $ 6,450  million

$6,450,000

Explanation:

Free cash flow (FCF) can be defined as the money or cash that remained after the company might have pay for its operating expenses as well as capital expenditures which is why companies, organisation, business owner or individual make use of FREE CASH FLOW to understand the profitability of their business.

Blur Corp

FCF = NOPAT – Net investment in operating capital

= $7,600M – (1,140+10)

= $7,600M - $1,150

=$6,450,000

Therefore Blur Corp is expected to generate free cash flow (FCF) of $6,450,000 over the next year.

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