EBIT is ₹200, Tax is 30%, Depreciation is ₹50, and CapEx is ₹70. What is the Free Cash Flow to the Firm (FCF

Calculate Taxable Income and NOPAT The first step is to determine the Net Operating Profit After Tax (NOPAT). This represents the cash earnings available to all capital providers if the firm had no debt. NOPAT = EBIT × (1- Tax Rate) NOPAT = 200 × (1 - 0.30) = 200 × 0.70 = 140 Adjust for Non-Cash Charges Depreciation is a non-cash expense that was subtracted to arrive at EBIT. Since it does not involve an actual cash outflow, it must be added back to the NOPAT to reflect the actual cash generated. Operating Cash Flow (approx.) = NOPAT + Depreciation 140+50= 190 Subtract Capital Expenditures Capital Expenditures (CapEx) represent cash outflows used to acquire or maintain physical assets. This cash is no longer available to be distributed to investors. FCFF = (NOPAT + Depreciation) – CapEx – ∆Working Capital Since the change in Working Capital is zero: FCFF = 190 -70 = 120