Question
Rocket Medical recently reported $12,500 of sales, $6,500 of operating costs other than depreciation, and $1,250...
Rocket Medical recently reported $12,500 of sales, $6,500 of
operating costs other than depreciation, and $1,250 of
depreciation. The company had $3,500 of bonds that carry a 7.5%
interest rate, and its federal-plus-state income tax rate was 25%.
During the year, the firm had expenditures on fixed assets of
$2,500 and net operating working capital that totaled $1,550. These
expenditures were necessary for it to sustain operations and
generate future sales and cash flows.
What was its free cash flow? (Round your intermediate and final
answers to whole dollar amount.)
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Homework Answers
Answer #1
Free cash flow (FCF) is the amount of money available to an organization at their complete disposal, after adjusting for the cash payments made for operating the business and servicing its assets. FCF concept ignores noncash expenditure and only accounts for expenses done in cash and the effects of working capital changes.
Use the information provided to calculate the Net Income and then calculate FCF:
Hence, the Free Cash Flow is $ 566.
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