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The 2018 income statement for John's Gym shoes that depreciation expense is $20 million, EBIT is $80 million, and taxes are $24 million. At the end of the year, the balance of gross fixed assets was $102 million. The increase in net operating working capital during the year was $18 million. John's free cash flow for the year was $41 million. What was the beginning of year balance for gross fixed assets

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Tundexiidn

Answer:

$85 million

Explanation:

Operating cash flow = EBIT - Taxes + Depreciation

Operating cash flow = $80 million - $24 million + $20 million

Operating cash flow = $76 million

Free cash flow = Operating cash flow - Investment in operating capital

$41 million = $76 million - Investment in operating capital

Investment in operating capital = $76 million - $41 million

Investment in operating capital = $35 million

Investment in operating capital = Change in Gross fixed assets + Change in Net operating working capital

$35 million = ($102 million - Beginning of year gross fixed assets) + $18 million

Beginning of year gross fixed assets = $102 million - $35 million + $18 million

Beginning of year gross fixed assets = $85 million

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