Question

For the year ending December​ 31, 2018, Sparks Electric expects net cash provided by operations of $ 328, 000​, net cash used by investing activities of $ 140, 000​, and net cash provided by financing activities of $ 47,000. Sparks plans to spend $ 252,000 to add a warehouse for its operations and pay $ 25,000 in cash dividends. What is the amount of free cash​ flow?

Answer 1

Answer:

$76,000

Explanation:

Free cash flow is the cash flow from operating activities minus the capital expenditure.

To obtain free cash flow, the $252,000 planned to add to warehouse for operations will be deducted from the $328,000 expected net cash to be provided by operations as follows:

Free Cash Flow = $328,000 - $252,000

                          = $76,000  

Therefore, the amount of the free cash flow is $76,000.

Note that payment of $25,000 in cash dividend will be included under the financing activities and it is not relevant in calculating the free cash flow amount.

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