You are trying to compute the change in working capital to use in computing free cash flow to the firm for Zapata Inc. The firms total working capital increased from $100 million last year to $120 million this year.

However, this working capital includes cash and short term interest bearing debt. Last years cash balance had $30 million in cash where only $10 where related to the operations and $15 million in short term debt. This years cash balance has $20 million in cash where $15 million where related to the operations and $25 million in short term debt.

What effect did working capital have on your cash flow this year?

Group of answers:

a. Decrease cash flow by $20 million

b.Increase cash flow by $20 million

c. Decrease cash flow by $45 million

d. Increase cash flow by $45 million

e. Non of the above