Problem 1. ChemTech – Free Cash Flow 0

Problem 1. ChemTech – Free Cash Flow 0

Chemtec is undertaking a project that will require an upfront investment today in net working capital, and plant and equipment (i.e., capital expenditures) of $100 million and $200 million, respectively. If there are no revenues or expenses expected until next year, what is the project’s free cash flow today in millions of dollars?

I know the answer to Problem 1 is -300.00

Problem 2. ChemTech – Free Cash Flow 1

Continuing from Problem 1, at the end of the first year, Chemtec is expecting sales of $250 million and costs of $125 million. There are no more required investments in either net working capital or plant and equipment. However, the existing plant and equipment will experience $50 million of depreciation. Assume that Chemtec’s marginal tax rate on earnings is 35% . Assuming that all of these cash flow occur at the end of the first year, what is the first year’s free cash flow?

 
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