X Mintap. Co gage lear × (Hgoogle-Yahoo Search, × 0) Stockholders Equity C Not s

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X Mintap. Co gage lear × (Hgoogle-Yahoo Search, × 0) Stockholders Equity C Not secure X ng cer gage.com/static/nb indechtml? bld-641827&nbNodelda237065; OS&ISEN.970; MINDTAP Assignment 03 - Financial Statements, Cash Flow, and Taxes Due Today at 1159 PM PST 6. Free cash flow Aa Aa Accounting statements represent a company's earnings, but this is not the real cash that a compary generates Earnings data can be manipulated and can be deceiving. Thus, corporate decision makers and security analysts focus on the free cash flow that a firm generates to analyze the company's real cash position. Which of the following statements best describes free cash flow? O Cash flows generated by operating the business O Residual cash flow after taking into account operating cash flows, including fixed-asset acquisitions, asset sales, and working-capital expenditures Suppose you are the only owner of a chain of coffee shops near universities. Your current carfés are you are interested in starting a fine-dining restaurant. You decide to use the cash generated from your existing business to enter into a new business. Your accountant provides you with the following data on your current financial well, but Financial update as of June 15 . Your existing business generates $147,000 in EBIT * The corporate tax rate applicable to your business is 35%. The depreciation expense reported in the financial statements is $28,000, - You dont need to spend any money for new oquipment in your existing cafés; however do need $22.050 of additional cash You alco neod to purchase $13,760 in additional supplies-such ar clith tabileclenes ond napkins, and more formal tablowargon credit. . It is also estimated that your accruals, incuding taves and wages payable, wit inrease by $7.350 Bosed on your evalustion you have

Explanation / Answer

1) option b

FCF = CFO - capital expenditure Cash flow from operating Activities CFO = Net Income + Depreciation - Net Working Capital
FCF = EBIT (1-tax rate) + (depreciation) + - (change in net working capital) - (capital expenditure). FCF = $147000 x (1-35%)+$28000 - $26,460,- 0 $97,090.00 Changes in NWC = $22,050 + 11760 - $7350 $26,460.00 Capital expenditure $0.00

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