Question
A company recently reported $9,250 of sales, $5,750 of operating costs other than depreciation, and $700 of depreciation. It had $3,200 of outstanding bonds that
A company recently reported $9,250 of sales, $5,750 of operating costs other than depreciation, and $700 of depreciation. It had $3,200 of outstanding bonds that carry a 5% interest rate, and its federal-plus-state income tax rate is 35% and has a payout ratio of 40%. In order to sustain its operations and thus generate sales and cash flows in the future, the firm was required to make $1,250 of capital expenditures on new fixed assets and to invest $300 in operating working capital. What is the free cash flow for the firm? (FCFF) a) $970 b) $830 c) $1188 d) $1295 e) None of the above
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