The 2013 Income Statement for Paige's Purses Shows That Depreciation

The 2013 income statement for Paige's Purses shows that depreciation expense is $10 million, EBIT is $25 million, EBT is $15 million, and the tax rate is 30 percent. At the beginning of the year, the balance of gross fixed assets was $80 million and net operating working capital was $30 million. At the end of the year gross fixed assets was $100 million. Paige's free cash flow for the year was $20 million. What is their end of year balance for net operating working capital?

A) $10.5 million
B) $14 million
C) $20.5 million
D) $30.5 million

Correct Answer:

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