Below is an excerpt from the cash flow statement of a firm for fiscal year 2013:

Question

Below is an excerpt from the cash flow statement of a firm for fiscal year 2013:

Additional information:
Cash interest receipts: 110
Cash interest payments: (200)

From the reformulated equity statement:
Shareholders’ equity December 31, 2012: 5,500
Shareholders’ equity December 31, 2013: 4,760
Net payout to shareholders: 2,500

The firm’s tax rate is 35%.

Calculate free cash flow for 2013. For this you will need to make adjustments to CFO and CFI and calculate using the adjusted numbers (in millions of dollars, rounded to the hundredth place).

Cash flow from operating activities: Net Income 1500 Adjustments to reconcile net income to net net cash provided by operating activities: Depreciation and Amortization 250 Amortization of software 400 Tax benefits of employee stock plans 450 Special charges 200 (Gains)/Losses on investments 20 Change in operating assets and liabilities Receivables 600 Inventories 250 Pension assets -475 Other Assets 70 Accounts payable -50 Pension liabilities 85 Other liabilities 200 Net cash provided by operating activities 3500 Cash flows from investing activities payments for PPE -2000 proceeds from disposition of PPE 800 Investment in software -500 Purchase of marketable securities -1500 Proceeds from disposition of marketable securities 1200 Net cash used in investing activities -2000

Explanation / Answer

CASH FROM OPERATIONS

Cash interest payments $200

(less) cash interest receipts $110

Cash from operations $90

CASH FROM INVESTMENTS

Net payout to shareholders $ 2500

(less) Redeemption of equity share $740

Cash from investments $1760

TOTAL CASH FLOW $1850

Tax paid $600

Net Cash flow $1250

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