| Course | FNCE 4101 Corporate Finance |
|---|---|
| Week | Week 2 |
| Paper type | Cash flow build |
| Length | About 750 words, 5 pages |
| Format | APA 7 student paper |
| School | Walden University |
| Program | BS in Business Administration |
| Updated | October 2026 |
Free sample paper for FNCE 4101 Week 2
Building Free Cash Flow to the Firm for Halvorsen Industrial Supply, Fiscal 2025: From $185 Million of Operating Income to $109.6 Million, Line by Line, With a Reconciliation to the Cash Flow Statement
Student Name
Walden University
FNCE 4101: Corporate Finance
Instructor Name
Month Day, Year
Building Free Cash Flow to the Firm for Halvorsen Industrial Supply, Fiscal 2025: From $185 Million of Operating Income to $109.6 Million, Line by Line, With a Reconciliation to the Cash Flow Statement
The Company and the Source
Halvorsen Industrial Supply is a composite publicly listed distributor of maintenance, repair and operating parts to factories in the Midwest, used throughout this course. Its fiscal 2025 annual report supplies every figure below, in millions of U.S. dollars. This paper builds free cash flow to the firm: the money left for lenders and shareholders together after taxes and after the reinvestment the business requires to keep running and growing (Damodaran, 2012).
The Schedule
Table 1
Free Cash Flow to the Firm, Fiscal 2025 (in millions of dollars)
| Line | Amount | Source and note | |
|---|---|---|
| Operating income (EBIT) | 185.0 | Income statement | |
| Less taxes on operating income at 24 percent | (44.4) | Effective rate reported in the tax note, not the statutory rate | |
| Net operating profit after tax | 140.6 | Operating income less operating taxes | |
| Add depreciation and amortization | 42.0 | Cash flow statement, operating section | |
| Less capital expenditure | (55.0) | Cash flow statement, investing section: purchases of property and equipment | |
| Less increase in net working capital | (18.0) | Change between the two balance sheet dates | |
| Free cash flow to the firm | 109.6 | | |
Halvorsen is a composite company; figures constructed for this course. Parentheses denote deductions.
Notes on Each Line
Taxes. Tax is charged at the effective rate of 24 percent that the tax note reports, rather than the combined statutory federal and state rate. The effective rate reflects the taxes the company actually expects to pay on its operating profit, which is what the cash flow needs. Applying the rate to operating income, rather than taking reported tax expense, removes the tax saving from interest; that saving is captured later in the after-tax cost of debt, so counting it here would count it twice (Brealey et al., 2020).
Depreciation and amortization. These are added back as one line because they reduced operating income without using cash this year. The figure, $42.0 million, comes from the cash flow statement rather than the income statement, because some depreciation is included in cost of goods sold and does not appear as a separate income statement line.
Capital expenditure. The $55.0 million is taken from purchases of property and equipment in the investing section. It is not calculated from the change in gross property on the balance sheet, which would also pick up disposals and write-offs and would not match the cash actually spent.
Working capital. Net working capital, defined as receivables plus inventory minus payables and accrued liabilities, rose by $18.0 million between the two year-end balance sheets, so the company absorbed $18.0 million of cash into its operating cycle. The line carries a negative sign. Cash and debt are excluded from working capital because they belong to financing, not to the operating cycle the measure is meant to capture.
Reconciliation
The two routes produce the same $109.6 million. Reported operating cash flow already deducts interest, because net income is after interest; adding back the after-tax interest puts the figure on the same basis as the build, which measures cash before any payment to lenders or shareholders.
Table 2
Reconciling Free Cash Flow to the Firm With the Cash Flow Statement (in millions of dollars)
| Line | Amount | |
|---|---|
| Net cash from operating activities, as reported | 141.8 | |
| Add after-tax interest expense (30.0 x 0.76) | 22.8 | |
| Less capital expenditure | (55.0) | |
| Free cash flow to the firm | 109.6 | |
Reported operating cash flow equals net income of 117.8 plus depreciation of 42.0 less the 18.0 working capital increase.
What the Figure Means
Halvorsen generated $109.6 million in fiscal 2025 that it could pay to lenders and shareholders, or keep, without cutting the investment its business plan requires. That is about 59 percent of operating income, a conversion rate held down mainly by the working capital increase as sales grew. This figure is the base for the discounting and valuation work in later weeks (Koller et al., 2020). Two cautions apply before using it as a base. First, one year's working capital change can be unusual; a three-year average would smooth it. Second, capital expenditure of $55.0 million is only modestly above depreciation of $42.0 million, which suggests the company is maintaining its asset base more than expanding it. If growth is expected to accelerate, future capital spending will need to rise, and free cash flow will grow more slowly than operating profit.
References
Brealey, R. A., Myers, S. C., & Allen, F. (2020). Principles of corporate finance (13th ed.). McGraw Hill.
Damodaran, A. (2012). Investment valuation: Tools and techniques for determining the value of any asset (3rd ed.). Wiley.
Koller, T., Goedhart, M., & Wessels, D. (2020). Valuation: Measuring and managing the value of companies (7th ed.). Wiley.
Reading the FNCE 4101 Week 2 instructions
In Week 2 you build free cash flow to the firm for one company and year from its published statements. Lay out a schedule from operating income to free cash flow: taxes on operating income, depreciation and amortization added back, capital expenditure subtracted and the change in working capital with its sign shown. Under the schedule, note the source and treatment of each line, especially the tax rate used, where capital spending was taken from and how working capital was defined. Reconcile your figure with the cash flow statement. Close with what the figure means and any caution about using it as a base for valuation.
Inside the FNCE 4101 Week 2 example
The build introduces Halvorsen and its fiscal 2025 report, citing Damodaran for the definition. A seven-line schedule reaches $109.6 million. Notes explain the effective tax rate and why reported tax expense would double-count the interest saving, citing Brealey and colleagues; why depreciation comes from the cash flow statement; why capital spending comes from the investing section; and how working capital excludes cash and debt. A reconciliation table starts from reported operating cash flow of $141.8 million, adds $22.8 million of after-tax interest and subtracts capital spending. The closing section, citing Koller and colleagues, notes the 59 percent conversion rate and two cautions: an unusual working capital year and capital spending close to depreciation.
Where the marks sit in the FNCE 4101 Week 2 rubric
Cash flow builds are graded on correct structure, sourced inputs and clear notes. Each line must come from an identifiable place in the filing, and the notes should explain choices another analyst might make differently, such as effective versus statutory tax rates. Working capital must carry the right sign. The reconciliation to reported operating cash flow is what lets a grader trust the build without redoing it, and a build that fails to reconcile signals an error. Strong builds end with a short reading of what the figure means and its limits as a base for valuation. Units must be stated and consistent throughout.
FNCE 4101 Week 2 help: mistakes that cost marks
Lay the three financial statements next to one another. Start from operating income and apply the effective tax rate from the tax note. Take depreciation and capital spending from the cash flow statement, not from balance sheet changes. Compute working capital from the two balance sheets, leaving out cash and debt, and check whether it rose or fell. Then reconcile: start from reported operating cash flow, add back after-tax interest and subtract capital spending. If the two answers differ, look for a sign error. Send us the filing you are working from, and a model build can be prepared with you. State the unit at the top of the schedule, since mixing thousands and millions is the most common error in these builds. A short note under each line is better than a long paragraph after the table.
Get a FNCE 4101 Week 2 example written to your instructions
Send across the Week 2 prompt, the rubric your section posted and the company name if one is assigned, and the desk builds the schedule against that wording. The first sample is free of charge and lands inside 24-48 hours. Filings for the assigned company get pulled first, so the footnotes point at real published lines.
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FNCE 4101 Week 2 questions, answered
Where can I find a free FNCE 4101 Week 2 sample paper?
The full schedule, notes and reconciliation are posted below, free.
What free cash flow does the FNCE 4101 Week 2 build reach?
$109.6 million for fiscal 2025, from operating income of $185.0 million.
Why use the effective tax rate?
It reflects the taxes the company actually expects to pay on operating profit, and taxing operating income avoids counting the interest tax saving twice.
Where does capital spending come from?
From purchases of property and equipment in the investing section, not from the change in gross property on the balance sheet.
How is the build reconciled?
Reported operating cash flow of $141.8 million, plus $22.8 million after-tax interest, less $55.0 million capital spending, gives the same $109.6 million.