Using the financial statements of Last FAD, what is the FCFF for the current year?

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Question restatement: We’re using Last FAD’s financial statements to determine the FCFF for the current year, choosing from four numeric options.
Option 1: '-$58 million'. This would imply that after accounting for operating cash flow, taxes, capex, and changes in working capital, the firm still has a negative free cash flow to the firm of 58 million dollars. To accept this, one would need a combination of very weak operating cash flow and/or unusually high capital expenditures or large working capital outflows. Without seeing the specific EBIT, taxes, depreciation, capital expenditures, and changes in net working capital, this figure seems unlikely, but it is not impossible in a distressed year. The key issue is that FCFF is typically influenced by operating profitability and investment needs; a large negative figure would require substantial outflows, which must be supported by the inputs.
Option 2: '$505 million'. A positive 505 million would indicate either very strong after-tax operating cash flow and relatively modest capex, or a combination that generates a large surplus after investments. If the company had large discretionary investments or unusual non-cash adjustments, this could inflate FCFF, but such a high number usually requires compelling, clearly positive drivers in EBIT and D&A minus capex. Absent those supportive details, this option appears inflated relative to a standard annual FCFF computation.
Option 3: '$140 million'. This figure sits in a plausible range for FCFF for many firms, representing a balance where after-tax operating cash flow and non-cash adjustments cover depreciation, while capital expenditures and net working capital changes are at a level that doesn’t overwhelm cash generation. In typical FCFF calculations, FCFF = EBIT(1−tax rate) + non-cash charges (like depreciation) − capex − increases in working capital. If Last FAD’s inputs yield that outcome, this option would be consistent with a steady operating performance paired with moderate investment needs.
Option 4: '$123 million'. This is another plausible FCFF result, slightly below $140 million. Differences between $123m and $140m hinge on small variances in operating performance, tax effects, depreciation, or incremental investments. Without the exact line items, it’s hard to justify precisely which component drove the small delta, but it remains within a reasonable corridor for FCFF values.
Overall reasoning approach: FCFF is a cash-based measure that starts from operating profitability after taxes, adds back non-cash expenses, and subtracts capital expenditures and net working capital changes. Each option represents a distinct combination of those inputs. The option that aligns with the actual reported EBIT after tax, the depreciation add-backs, and the recorded capex and working capital movements will be the one that matches the computed FCFF in Last FAD’s statements. The other choices diverge based on either an excessively negative result, an abnormally large positive figure, or a modest positive figure that would require specific input values to justify. The final selection should correspond to the numeric FCFF derived from the reported figures using the standard FCFF formula, ensuring consistency with the statements presented.

MSB-250-300-002 Proctored Midcourse Exam 1

Using the financial statements of Last FAD, what is the FCFF for the current year?

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