Ask Question
25 January, 20:33

Sams Publishing recently reported $10,750 of sales, $5,500 of operating costs other than depreciation, and $1,250 of depreciation. The company had $3,500 of bonds that carry a 6.25% interest rate, and its federal-plus-state income tax rate was 40%. During the year, the firm had expenditures on fixed assets and net operating working capital that totaled $1,350. These expenditures were necessary for it to sustain operations and generate future sales and cash flows. What was its free cash flow

+3
Answers (1)
  1. 25 January, 21:02
    0
    The free cash flow is $2,300

    Explanation:

    To compute the free cash flow, we have to apply the formula which is shown below:

    = Earning before income and taxes * (1 - tax) + amortization & depreciation - capital expenditure - changes in working capital

    where,

    Earning before income and taxes = Sales - operating cost - depreciation

    = $10,750 - $5,500 - $1,250

    = $4,000

    And other values remain same

    Now put these values to the above formula

    So, the answer would be equal to

    = $4,000 * (1 - 40%) + $1,250 - $1,350

    = $2,300
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Sams Publishing recently reported $10,750 of sales, $5,500 of operating costs other than depreciation, and $1,250 of depreciation. The ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers