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Champagne, Inc., had revenues of $12 million, cash operating expenses of $8 million, and depreciation and...

Champagne, Inc., had revenues of $12 million, cash operating

expenses of $8 million, and depreciation and amortization of

$1.5 million during 2008. The firm purchased $700,000 of

equipment during the year while increasing its inventory by

$500,000 (with no corresponding increase in current

liabilities). The marginal tax rate for Champagne is 30 percent.

What is Champagne's Cash flow from operations? What is the

free cash flow for 2008?

A)$2,050,000

B)$2,500,000

C)$3,250,000

D)$4,000,000

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