Washington Enterprises had net income of $1,000,000, invested $150,000 in fixed assets, paid $50,000 in dividends, and took depreciation expense of $80,000? Free cash flow was

Question

Quizplus · Accepted Answer

Free cash flow is calculated as net income plus depreciation, minus capital expenditures, minus dividends paid. So, $1,000,000 + $80,000 - $150,000 - $50,000 = $880,000. However, the correct calculation for free cash flow should actually include the depreciation as a non-cash charge that is added back to net income, and then subtract capital expenditures and dividends. The mistake in the explanation indicates a calculation error, leading to the selection of option C as the correct answer by mistake. The correct calculation and choice should be $880,000, which aligns with option B, not C.

Washington Enterprises Had Net Income of $1,000,000, Invested $150,000 in Fixed