The Financial Analysis of Netflix's New Production Facility in New Jersey

Question:

Based on the estimates provided by Netflix's financial team for the new production facility in New Jersey in 2023, what is the projected Free Cash Flow (FCF) from this project?

Answer:

The expected Free Cash Flow (FCF) from Netflix's new production facility in New Jersey for 2023 is $499.67. This indicates that the project is forecasted to generate cash inflows after taking into account all expenses and investments.

In order to calculate the Free Cash Flow (FCF) from the project, we need to consider the following steps:

1. Calculate the Operating Profit (EBIT):

The Operating Profit (EBIT) can be calculated by subtracting the variable costs from the sales.

EBIT = Sales - Variable Costs = 974 - 203 = 771

2. Calculate the Taxes:

The taxes are calculated by multiplying the EBIT with the tax rate, which in this case is 23%.

Taxes = EBIT * Tax Rate = 771 * 0.23 = 177.33

3. Calculate the Net Operating Profit After Taxes (NOPAT):

The NOPAT is computed by subtracting the taxes from the EBIT.

NOPAT = EBIT - Taxes = 771 - 177.33 = 593.67

4. Adjust for Depreciation:

The depreciation amount is deducted from the NOPAT to arrive at the Adjusted NOPAT.

Adjusted NOPAT = NOPAT - Depreciation = 593.67 - 17 = 576.67

5. Calculate the Change in Net Working Capital (NWC):

The change in NWC is determined by subtracting the previous year's NWC from the current year's NWC.

Change in NWC = Current Year NWC - Previous Year NWC = 58

6. Calculate the Free Cash Flow (FCF):

The final step is to subtract the change in NWC and Capital Expenditures (CapEx) from the Adjusted NOPAT to obtain the Free Cash Flow.

FCF = Adjusted NOPAT - Change in NWC - CapEx = 576.67 - 58 - 19 = 499.67

By following these calculations, we can determine the projected Free Cash Flow (FCF) for Netflix's new production facility in New Jersey for the year 2023.