You have gathered this information on a firm: $500,000 sales,$10,000 cash dividends,$300,000 cost of goods sold,$20,000 administrative expense,$20,000 depreciation expense,$40,000 interest expense,$10,000 purchase of productive equipment,no changes in working capital,and a tax rate of 35%.What is the free cash flow?

Question

Quizplus · Accepted Answer

Net income = ($500,000 − 300,000 − 20,000 − 20,000 − 40,000) × (1 − 0.35) = $78,000Cash flow from operations = $78,000 + 40,000 + 20,000 = $138,000Free cash flow = $138,000 − 10,000 = $128,000

You Have Gathered This Information on a Firm: $500,000 Sales,$10,000