Problem:
The Beckham Broadcasting Company (BBC) has operating income (EBIT) of the $2,500,000. The company’s depreciation expenditure is $500,000 and it has no amortization expenditure. The company is 100% equity financed. The company has the 40% tax rate, and its net investment in the operating capital is $1,000,000.What is the free cash flow of BBC’s?
a) $0
b) $500,000
c) $900,000
d) $1,000,000
e) $1,500,000