CA Final · Advanced Financial Management · Business Valuation
Kaveri Textiles has EBIT of ₹500 lakh, tax rate 30%, depreciation ₹60 lakh, capital expenditure ₹140 lakh and an increase in working capital of ₹30 lakh. Interest is ₹80 lakh. What is its FCFF?
FCFF is ₹240 lakh. After-tax EBIT is ₹350 lakh; adding depreciation of ₹60 lakh gives ₹410 lakh, and deducting capital expenditure of ₹140 lakh and working capital investment of ₹30 lakh leaves ₹240 lakh. Interest is ignored for FCFF.
- A₹240 lakhCorrect
- B₹296 lakh
- C₹350 lakh
- D₹190 lakh
Explanation
EBIT(1 - t) = 500 x 0.70 = 350. Add depreciation 60 = 410. Deduct capex 140 = 270 and working capital increase 30 = 240. Option 350 ignores adjustments; 296 would wrongly bring in interest effects.
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