Abbreviated Financial Statements Are Given for Fletcher Corporation in the Following

question 52

Essay

Abbreviated financial statements are given for Fletcher Corporation in the following table:
$\begin{array}{|l|l|l|}\hline &2010 \quad\quad\quad&2011 \quad\quad\quad\\\hline \text { Revenues } & \$ 600.0 & \$ 010 \\\hline \text { Operating expenses } & 520.0 & 600.0 \\\hline \text { Depreciation } & 16.0 & 18.0 \\\hline \begin{array}{l}\text { Earnings before } \\\text { interest and taxes }\end{array} & 64.0 & 72.0 \\\hline\text { Less Interest Expense } & 5.0 & 5.0 \\\hline \text { Less: Taxes }& 23.6 & 26.8\\\hline \text { Equals: Net income }&35.4&40.2 \\\hline \text { Addendum: } \\\hline \begin{array}{l}\text { Yearend working } \\\text { capital }\end{array} & 150 & 200 \\\hline \text { Principal repayment } & 25.0 & 25.0 \\\hline \text { Capital expenditures } & 20 & 10 \\\hline\end{array}$ Yearend working capital in 2009 was $160 million and the firm's marginal tax rate is 40% in both 2010 and 2011. Estimate the following for 2010 and 2011:
a. Free cash flow to equity.
b. Free cash flow to the firm.

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