A firm had an operating cash flow of 4,500, financing cash flow of 1,200 and an investing cash flow of -900. The firm has announced common stock dividends of
45 and preferred stock dividends of 23. If the outlays for maintenance of current capacity is 310, the firm's free cash flow equals ________.
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A. B. C. D.C
FCF = Cash from operations - outlays for maintenance of current capacity - dividends declared. In this case, FCF = 4,500 - 310 - 45 - 23 = 4,122.
To calculate the firm's free cash flow, we need to consider the different cash flows involved and make some adjustments.
Given: Operating Cash Flow: $4,500 Financing Cash Flow: $1,200 Investing Cash Flow: -$900 Common Stock Dividends: $45 Preferred Stock Dividends: $23 Outlays for maintenance of current capacity: $310
Free Cash Flow (FCF) can be calculated using the formula:
FCF = Operating Cash Flow - Investing Cash Flow - Dividends - Maintenance Outlays
Let's calculate each component step by step:
Operating Cash Flow: $4,500
Investing Cash Flow: -$900
Dividends:
Maintenance Outlays: $310
Now, let's calculate the Free Cash Flow (FCF):
FCF = $4,500 - (-$900) - $68 - $310 FCF = $4,500 + $900 - $68 - $310 FCF = $5,400 - $68 - $310 FCF = $5,400 - $378 FCF = $5,022
Therefore, the firm's Free Cash Flow equals $5,022.
None of the provided answer choices matches this calculation exactly, so it appears there might be an error in the answer options.