Wells Water Systems recently reported $12,550 of sales, $4,250 of operating cost

Question

Wells Water Systems recently reported $12,550 of sales, $4,250 of operating costs other than depreciation, and $1,700 of depreciation. The company had no amortization charges, it had $3,250 of outstanding bonds that carry a 6.75% interest rate, and its federal-plus-state income tax rate was 25%. In order to sustain its operations and thus generate sales and cash flows in the future, the firm was required to spend $1,050 to buy new fixed assets and to invest $475 in net operating working capital. How much free cash flow did Wells generate?   Please shouw your work.

Explanation / Answer

ans..

calculation of cash inflow sales 12550 less;operating cost 4250 Ebit 8300 less:intrest paid 219.375 pbt 8080.625 less :tax 2020.156 pat 6060.469 add:depreation 1700 cash inflow 7760.469 calculation of cash outflow exp. For new machin 1050 add; operating wor.capital 475 total 1525 net cash flow inflow 7760.46875 less: out flow 1525 6235.46875

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