Murphy & Murphy Enterprises expects the following for 2018: Net cash provided by operating activities of $\$ 232,000$
Net cash provided by financing activities of $\$ 18,000$
Net cash provided by investing activities of $\$ 67,000$
Cash dividends paid to stockholders of $\$ 16,000$ The business plans to spend $107,000 to purchase equipment.
What is the expected amount of free cash flow for 2018?

Question

Quizplus · Accepted Answer

Free cash flow is calculated as net cash provided by operating activities minus capital expenditures. Here, it's \$232,000 (net cash from operating activities) - \$107,000 (purchase of equipment) = \$125,000. However, since the question asks for the expected amount after considering all provided figures, including dividends paid which do not affect the calculation of free cash flow, the correct calculation remains \$125,000 - \$16,000 (dividends paid, which is a common misunderstanding but does not affect free cash flow) still equals \$125,000. The error in explanation led to the wrong choice being selected initially; the correct calculation for free cash flow does not subtract dividends paid, making the correct answer based on the provided calculation actually \$125,000, which was not listed as an option. The correct approach to answering the question based on the options provided would involve reevaluating the understanding of free cash flow, which is indeed \$232,000 - \$107,000 = \$125,000, but due to the error in the initial explanation and the options provided, the closest correct choice based on the calculation mistake was A) $109,000, which was incorrectly justified. The correct understanding and calculation should lead to recognizing an error in the initial selection process.

Murphy & Murphy Enterprises Expects the Following for 2018: Net $232,000\$ 232,000$232,000

Murphy & Murphy Enterprises Expects the Following for 2018: Net $\$ 232,000$